What can we expect from US employment data? Key charts and the impact on the financial market

04.07.2023 15:51|Analyst Team, Conotoxia Ltd.

Will this be the first time that the inverted bond yield curve has failed to predict the coming recession? We are likely to find out the full answer to this question on Friday, along with the US non-farm employment data, but today let's consider what we can expect from the upcoming readings and the actual state of the US labour market.

New job openings at Indeed in the US

Indeed is one of the largest recruitment platforms in the world. The online platform enables both employers and jobseekers to easily and efficiently connect with each other in the recruitment process.

Indeed acts as a job aggregator, collecting and presenting job advertisements from various sources, such as company websites, job portals, recruitment agencies, etc. Users can browse ads, search for jobs by various criteria such as location, industry or experience level, and apply directly or through the Indeed platform.

This year, the total number of listings on the Indeed platform in the US fell by 27% year-on-year, and the number of new listings fell by 17.5% year-on-year.

Source: Fred, Indeed data

The largest decline in job vacancies was recorded in three occupations: programmers (down by as much as 60% year-on-year), marketing professionals (down 44.6% year-on-year) and the banking sector (down 44.2% year-on-year). It seems interesting that the construction sector, which one would assume would be particularly affected by rising interest rates, recorded a relatively small decrease of 5.9% y/y. Nevertheless, all sectors show a noticeable decline in the number of employment offers. Could this be related to oversaturation in the US labour market?

Source: Fred, Indeed data

The decline in the number of vacancies in the IT sector may be linked to the development of artificial intelligence. However, the decline in job vacancies in the banking and media sectors may indeed be due to the poorer outlook for the near future. As a result, the performance of the Financial Select Sector SPDR Fund (XLF) may not be stunning in the near future.

Source: Conotoxia MT5, XLF, Daily

Is the situation in the United States really that good?

Let us now compare the situation in the non-agricultural sector regarding employment compared to other economies. It should be noted, however, that standards for classifying employment vary between countries. For example, it is now often reported that the unemployment rate in the United States is 3.7%. However, if we adopt the European methodology (the so-called U-6 aggregate), we find that the May unemployment rate would already have been 6.7%.

Let us now try to compare three significant world economies: United States, Germany and Japan. Admittedly, in Europe and Japan it is much more difficult (than in the US) to fire an employee because of the regulations in place. This can be seen from the situation in 2020, when, during the coronavirus and lockdown pandemic, the unemployment rate in the US rose to over 20%.

The US labour market is more flexible and adapts more quickly to changing economic circumstances. For this reason, it is difficult to conclude from the employment data, for example, that the US is doing worse than Europe. Nevertheless, the labour market situation, taking into account historical data, appears favourable and shows no signs of a change in trend. This may indicate the lack of impact of the current economic slowdown on final employment, which, may create an environment for the start of the next bull market.

Source: Fred

Source: Conotoxia MT5, US500, Daily

 

Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trading on CFDs is provided by Conotoxia Ltd. (CySEC no.336/17), which has the right to use the Conotoxia trademark.