Credit Agricole's forecast for US non-farm payrolls in June

Credit Agricole predicts that non-farm payrolls will increase by 200,000 in June, which is lower than the 272,000 increase in May, but still shows solid growth in the labor market. At the same time, the unemployment rate is expected to remain unchanged at 4.0%.

In terms of wages, the bank expects the average hourly wage to increase by 0.3% month-on-month in June, and the year-on-year growth rate will resume its downward trend after a slight rebound last month, falling from 4.1% to 3.9%.

The divergence of employment data

The bank pointed out that a significant change in recent employment data is the widening gap between enterprise surveys and household surveys. In the past 13 months, although non-farm employment increased by more than 3 million, employment in the household survey increased by only 121,000, forming a sharp contrast. Analyzes from multiple institutions have also pointed out this key departure.

The impact of immigration factors

Credit Agricole believes that immigration may have played a role in driving non-farm payrolls. However, immigration estimates in household surveys may affect the accuracy of the survey data, which means that the actual situation may be somewhere in between. Despite this, the bank does not believe that the labor market has collapsed, but believes that the US job market has begun to cool. However, non-farm payrolls data so far this year continue to exceed expectations.
Analysis by Credit Agricole suggests that while the U.S. labor market is beginning to show signs of cooling, overall employment remains robust. Immigration plays a role, but the gap between household and business surveys suggests that we need to consider a variety of data sources in a comprehensive manner.
 

Credit Agricole's forecast for the US job market: unemployment rate close to recession warning

Credit Agricole predicts that the U.S. job market will gradually cool, with the unemployment rate expected to rise to around 4.5% by mid-2025. This forecast suggests that the future job market may experience more layoffs rather than just adjusting through a reduction in job vacancies.

The impact of the Beveridge curve

The bank noted that the shape of the Beveridge curve suggests that as the job market cools further, the unemployment rate may rise faster, which means that future employment adjustments will be more inclined to layoffs rather than simply through a reduction in job vacancies.

The Fed’s View

Earlier, Federal Reserve Chairman Powell said that he expected the unemployment rate to remain at 4%, and believed that this level was still low. However, the forecast of Credit Agricole Bank showed that the unemployment rate in the future may be higher than this level, further approaching the recession warning.

Analysis by Credit Agricole shows that as the job market cools, the unemployment rate will gradually rise, possibly reaching around 4.5% by mid-2025. The shape of the Beveridge curve suggests that future employment adjustments will be achieved more through layoffs than simply reducing job vacancies.
 

The Federal Reserve and the Labor Market: Impact and Expectations of Cooling Employment

For the Fed, the current cooling of the labor market is seen as a positive sign because it helps achieve a better balance between labor supply and demand. However, the current softening of the market is not enough to force the Fed to take immediate action, so their focus remains on inflation. Credit Agricole Bank pointed out that the June employment report is unlikely to change this focus.

Fed's Response and Forecast

Nevertheless, Credit Agricole believes that the Fed's response mechanism in the job market will be asymmetric. If the labor market cools more than expected in the future, this may attract the attention of the Fed. Inflation is expected to remain relatively mild in the coming months, accompanied by a gradual cooling of the labor market, which will keep the Fed on track to further cut interest rates in September and cut interest rates again in December, with a total of 50 basis points expected to be cut this year.
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