Is the US labor market cooling down and personal consumption growth slowing down?

The labor market will continue to weaken, new non agricultural employment will trend downwards, and the unemployment rate will trend upwards. The high growth of the US economy is unsustainable and will slow down again in the fourth quarter. Looking ahead to 2024, the possibility of a mild recession in the United States cannot be ruled out, which means that the end of the overseas tightening cycle is not far away. Personal consumption, which plays a driving role in the US economy, may not be sustainable. Due to ongoing inflation and high interest rates, households' ability to repay debts has decreased, and the proportion of credit card delinquencies has reached its highest level in 12 years. The situation of defaulting on repaying car loans is also increasing, so banks are more cautious in granting credit. In the event of a slowdown in the labor market, whether consumption can remain strong will determine the trend of the economy.

Signs of a cooling down in the US labor market.

We have summarized the five major signs of a cooling in the US labor market, and in the future, it is expected that the labor market will continue to weaken: (1) Since 2023, new non-farm employment has been continuously downward revised (except for July), and historically, the continuous significant downward revision of new non-farm employment generally corresponds to economic downturns (even recessions). (2) The number of job vacancies and labor market gaps are rapidly narrowing, and the buffer zone in the job market is shrinking. The direct impact of subsequent economic cooling on employment will be more apparent. (3) The "deep impact" of high interest rates on industry employment is being reflected. Currently, the education and medical industry, which is only the least sensitive to interest rates, still maintains strong employment resilience, while leisure hotels, professional and commercial services, which previously contributed significantly to new employment, have significantly cooled down. (4) The rising unemployment rate will be a trend, with at least 220000 new non agricultural jobs added per month, which is a condition for the unemployment rate to remain stable. However, against the backdrop of a decreasing trend in new non agricultural employment, it is difficult for the monthly increase in non agricultural employment to exceed 220000 yuan. (5) In terms of other employment indicators, the weekly number of new and new applicants for unemployment benefits began to rebound again in early October. The monthly increase in ADP employment has dropped to 127000, the lowest level since April 2021, with a three-month moving average.

Manufacturing activity in the United States declined in October

Due to the unfulfilled demand for manufactured goods, factory activity in the United States unexpectedly contracted at a faster pace in October. The PMI index of the Supply Management Association decreased by 2.3% last month to 46.7; New orders decreased by 3.7% to 45.5. The chairman of the investigation committee said, 'Demand does not exist.' The index measurement below 50 indicates contraction. The decline in new orders exceeded our expectations. New export orders are still in the contraction range, but increased by 2% to 49.4. And he added that the positive side is that the production level remains above 50. The ISM production index decreased by 2.1% to 50.4. Fiore added, "Manufacturers have made adjustments based on their expected demand levels for the first quarter of 2024." However, the industry is also cutting costs. The ISM employment index fell 4.4% to 46.8. Companies that reduce their workforce through natural attrition have begun to lay off employees. Manufacturers clearly have material costs and labor issues, "he added, They know that demand will not increase in the fourth quarter. Layoffs are the quickest way to cut costs, "said a technology executive." The market is still tough, and we will focus more resources on sales and marketing to drive our equipment to achieve greater sales and new market penetration. "" Many leadership are focused on what we can do in the short term, which will also support the company's long-term goals

The growth rate of personal consumption in the United States may slow down

Personal consumption in the United States accounts for approximately 70% of GDP, and the economic growth rate may vary significantly due to a slowdown in personal consumption growth. The real economic growth rate of the United States in the third quarter of 2023 was 4.9%, the highest level in seven quarters, mainly due to a consumption growth rate of 4%. The active consumption of households is not only supported by rising wages and reduced savings, but also by the use of credit cards and "borrowing consumption" from banks. According to a quarterly household debt survey released by the Federal Reserve Bank of New York on the 7th, the total credit card debt in the United States in the third quarter was $1.079 trillion, an increase of $154 billion compared to the same period last year, setting the highest record since data was available in 1999. What is of concern is not only the surge in credit card debt, but also the rise in delinquency rates for loans. More than 8% of the total credit card debt is owed for more than 30 days, an increase of approximately 2.8 percentage points from a year ago. The proportion of more serious cases of being delayed for more than 90 days has reached around 5.8%, the highest level in nearly 12 years. According to the Federal Reserve Bank of New York, the proportion of low-income earners in arrears has significantly increased, with a significant increase in severe delinquency among people aged 30 to 39 by age. The bank's household debt survey also shows that the default rate on car loans has continued to rise. More than 40 million people in the United States are burdened with student loans. As a special case of the COVID-19 epidemic, student loans have been granted a grace period of three and a half years since March 2020, but they have to repay debts since October. The impact is of great concern.