US: Labour market outlook remains cautious – UOB

Alvin Liew, Economist at UOB Group’s Global Economics & Markets Research, reviewed the latest Non-farm Payrolls for the month of July.

Key Quotes

“Following the record 4.791 million new jobs in June, the US nonfarm payrolls (NFP) increased by 1.763m in July… The NFP again outshined the recent ADP report which saw job gains of just 167k.”

“US unemployment rate eased further to 10.2% in July… as the labor participation rate inched lower to 61.4% (from 61.5% in June).”

“The other recurring issue was that the Bureau of Labour Statistics (BLS) again highlighted a persistent misclassification of a number of workers as ‘absent’ from work instead of “unemployed on temporary layoff” in July. This has been an issue for the BLS since March, although the severity of the problem has eased especially in June and July.”

“The US employment situation has improved post-April, accumulating 9.28 million payrolls increases in the months between MayJuly, making up for a sizeable portion of the 22.16 million job losses recorded in March and April combined.”

“That said, the longer the wait, the more likely temporary job losses will turn permanent. And the jobs recovery momentum is clearly derailed in face of the COVID-19 resurgence, which means potentially a repeat of some of the restriction measures to contain it, and thus, re-inflicting the damage to the labor market. We continue to expect US unemployment rate to end the year at 9.5%, implying some improvement still in the employment front in 2H, but the pace of improvement is unlikely to match what was experienced in May-July period.”