The US Non-Farm Payroll data showed an increase of 187K (est. 200K), with wages growing 0.4% month-over-month, higher than the expected +0.3%.
①Compared to the higher-than-expected wage growth, the below-expectation Non-Farm Payroll may have more indicative significance. The employment figures for May and June were revised downward to a certain extent, indicating that the economy has started to slow down. This also proves that high deficits cannot fully offset the negative impact of high interest rates on the economy. It is expected that future economic data will continue to slow down, and the discussion about the US recovery can be put to rest;
②As shown in Figure 2, wage growth shows some stickiness. Considering the lagging nature of wages, a slowdown in wage growth will likely only occur when unemployment rises significantly.
Overall, this is a lukewarm set of data. Although the economy is trending downward, the stickiness of wages will still support consumption—until new job additions stop being moderate and begin affecting the unemployment rate.
With CPI showing a downward trend but having a floor, there is currently no visible risk of a rebound. Future releases are highly likely to meet expectations. However, for the data-dependent Federal Reserve, the question of a September rate hike remains unresolved.
Finally, here’s a bit of subjective opinion:
The market has already priced in expectations regarding CPI, employment, and even the Fed's rate hikes fairly well. Going forward, it might focus more on pricing long-term US Treasury yields.
An economic downturn will significantly suppress short-term rates, but the long end is less clear. Long bonds have been a negative carry trade this year, and without a noticeable rise in unemployment or the March SVB event...