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The recession has officially begun! The employment data has exceeded expectations, and the US data is confusing Last Friday, the United States released non-farm payrolls for July, adding 528,000 non-farm payrolls, significantly exceeding expectations by 250,000, and a significant increase from June's 370,000. The unemployment rate announced at the same time was only 3.5%, the lowest level in nearly 10 years. Many people expressed that they were confused and could not understand the data in the United States. On the one hand, MARKIT's Purchasing Managers Index has entered the recession zone, and the US GDP also fell by 0.9% in the second quarter, entering a technical recession. Why is the employment data not only good, but surprisingly good! First of all, the non-agricultural data has considerable chance, and the fluctuation in a single month can be very large. An extra hire by a mega-corporation, or a strike, can significantly affect the non-farm payrolls data. For example, large employers like Ford can often significantly affect the US non-farm payrolls. In addition, the relationship between unemployment and GDP is not simply linear. According to Okun's law of economics, every two percentage points of real GDP below potential GDP increases the unemployment rate by one percentage point. So what matters is the difference between real GDP and potential GDP. Now, although the GDP growth rate of the United States is declining, the potential GDP may be lower, so it can also reach a state similar to full employment. To put it more simply, the potential of the United States has reached its peak, and the current level of GDP growth rate has already done its best. Therefore, even if the stimulus continues or the pace of easing is slowed down, I don’t think the GDP growth rate of the United States will increase significantly, and the trend of recession has basically been determined. The better-than-expected non-farm payrolls also made the Fed's next rate hike, in September, full of uncertainty. Previously, the Fed hinted that inflation has peaked and may slow down the pace of interest rate hikes. The market once expected a rate hike of only 50 basis points in September. But after the non-agricultural data came out, the market began to think that the Fed is likely to raise interest rates by 75 basis points, and the probability has now reached two-thirds. However, this is still full of variables. It needs to wait until September to raise interest rates before it can be determined. This will be a very critical interest rate hike. The Fed’s attitude to raise interest rates in the future will flow out in this interest rate hike and the minutes of subsequent interest rate meetings, which also determines global capital. market trends. At present, the logic of global stock markets and commodities is changing. Before, it was the Fed raising interest rates, which suppressed both the stock market and the bulk. Since then, European interest rate hikes have driven down U.S. bond yields and the U.S. dollar index. Then, the Federal Reserve hinted at a slowdown in interest rate hikes, further pushing down U.S. bond yields, which led to a sharp rebound in both the stock market and bulk commodities. Only crude oil with a high degree of certainty , hit a new low. And I don't think this situation will last long. Soon, the market will realize that a recession has arrived and demand will plummet. The logic of market transactions has shifted from expectations of monetary policy to the impact of the real economy on listed companies and commodities. This wave of rebound is not unexpected, but the magnitude and duration are difficult to determine, but the logic of long-term bearishness will not change. |