US: Employment contracts due to virus cases

While non-farm payrolls in the USA, which is expected to increase by 50K, decreased by 140K in December, the unemployment rate remained unchanged at 6.7%. It is seen that the disruption in the labor market is caused by the adverse effects of rising coronavirus cases and related closures on business activities. In the period when ADP points to 123K losses in the private sector, there is a 95K decrease in the private sector item in official data. The average of unemployment applications for the whole of December was 837K, and the employment item in the ISM service index had shrunk with 48.2. Leading high frequency data and employment indicators revealed that there might be contraction.

When compared to the employment lost and recovered during the Covid-19 period, it is seen that nearly 10 million people are still away from the workforce. It is normally expected that vaccination will speed up the process, but as in the whole world, there is a priority ranking in the USA and there may be new employment losses in the period until the healthy working population is vaccinated. The fact that the new variant virus seen in the United Kingdom and Germany is also seen in the USA raises concerns, new and harder shutdowns will cause new job losses.

If we look at the sub items; job losses in leisure, accommodation and private education; appear to be partially offset by gains in the professional services and business services, retail trade and construction sectors. Labor force participation rate and employment-population ratio remained unchanged over the month, at 61.5% and 57.4%, respectively. The rate of working from home, which was 21.8% in November, rose to 23.7% in December. In December, the average hourly earnings for all non-farm workers increased by 23 cents to $ 29.81. The average hourly earnings of private and non-executive employees increased by 20 cents to $ 25.09. These increases are largely a reflection of a wage increase driven by the number of low-wage workers leaving their jobs in the leisure and hospitality sectors. Increasing the level of quarantine measures will mean greater loss of employment in sectors under the service segment.

Along with the Blue Wave theory, the prospects for fiscal expansion have now gained weight. Highly, the increase in yields is based on expectations for a recovery in the economy. The main factors underpinning this are vaccination and financial package. Inflation expectations have moved in a somewhat optimistic way, it is a natural possibility that the breakeven inflation point will decrease with the yields. In the most extreme case, the Fed could step in, bringing "an implicit yield curve control" to yields that normally should not rise due to open-ended bond purchases. The exit from the bond and the rise in yields should not caused by sudden expectations and panic exits; It will be healthier to be within the framework of economic circular movement.

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