Event: U.S. quarterly non-farm payrolls decreased by 140,000 in December 2020, weaker than the expected increase of 50,000; the unemployment rate was 6.7%, slightly better than the expected value of 6.8%. Our view on this is as follows.
Non-farm payroll growth turned from positive to negative in December, and it will still take time to return to normal in total. The U.S. job market recovery reversed in December, with non-farm payrolls turning from positive to negative and significantly weaker than expected, while the unemployment rate ended six consecutive months of decline and the labor force participation rate remained unchanged from the previous period. The third wave of the epidemic is the main factor causing the reversal of the labor market. Currently, there are more than 300,000 new confirmed cases in the U.S. every day and nearly 4,000 deaths per day, causing the job market recovery to stall. In total, the current U.S. non-farm employment gap repair 55.6%, 6.7% unemployment rate is still higher than the 3.5% in February, the gap is still large.
By industry, the impact of the epidemic, the current non-farm decline almost entirely concentrated in the hotel and leisure industry. December non-farm employment was mainly dragged down by hotel and leisure employment, its employment fell 498,000, the rate of decline far more than the next ranking government employment (down 45,000). The business services and retail industries performed relatively brightly, with 161,000 and 120,000 new jobs added in the period, a significant improvement over the previous period, indicating that economic activity in industries other than the hotel and leisure industry is actually still in the repair zone. And most industries, including the hotel and leisure industry, saw hourly wages repair, reflecting that unemployment in the current period was dominated by low-income labor.
It is easy to move from frugality to luxury: the low willingness of the low-educated population to return to work is supported by fiscal stimulus. Although the overall unemployment rate and labor productivity were unchanged from the previous period, by structure, the unemployment rate of part-time, low-education and low-age population climbed significantly, while the labor force participation rate of low-education population also dropped significantly, a situation similar to the previous period. Reflecting the impact of the epidemic, people with low labor quality were hit more seriously. On the one hand, under the epidemic, the employment demand in the service industry, which has a greater demand for the low-educated population, declined; on the other hand, the continuous fiscal stimulus may reduce the willingness of this group to work, thus dragging down the labor supply.
It is difficult to move from luxury to frugality: against the backdrop of the continued drag of the epidemic, the U.S. fiscal stimulus is “difficult to stop”. As mentioned above, under the combined effect of the epidemic and fiscal stimulus, both the supply and demand sides of the U.S. labor market are being suppressed. The recent slow progress of the U.S. vaccine promotion (the current U.S. vaccination rate is about 1.8%, and the CDC expects the vaccination rate to be 7.3% by the end of the month), the service industry recovery is still difficult to see in the short term, which will drag down the normal wage income recovery of U.S. residents, resulting in consumer repair in the future may rely more and more on the issuance of stimulus checks.
The company’s main focus is on the financial markets, and the market is still on the “Biden Trade”. We mentioned in our report “Biden Trade” what to buy, after the Democratic Party achieved a sweep of the White House and both houses of Congress, the difficulty of implementing Biden’s policy dropped significantly, and it is expected that a new round of fiscal stimulus will be introduced quickly, in the easing of fiscal recovery to speed up the pace of inflationary expectations, the combined effect of financial market risk appetite or will further rise.
Risk: The impact of the rebound of the epidemic exceeds expectations; the advancement of vaccines is significantly less than expected.