Market Note:

Jerome Powell made significant changes in the Bank’s policy statement at the September meeting, he said that the current interest rates will be maintained until the inflation reaches 2 percent, in line with the maximum employment target. Then, non-farm payrolls, which is the indicator of the performance of the labor market in the world’s largest economy, gained importance. In other words, it had signaled that the Fed, the central bank with the world’s most important reserve currency, would tolerate the rise in inflation for a certain period of time, prioritize the labor market and stretch its current monetary policy on these bases. For this reason, the employment figures published by the Ministry of Labor in the USA have become a critical data flow in the macro economic calendar of the markets.

* The number of applicants for non-farm payrolls (TDI) change, ADP private sector employment change and jobless claims in the USA is divided by 10 thousand in the composite chart above. The left axis of the graph shows TDI and ADP data, and the right axis shows the number of applicants for jobless claims.

On the other hand, the decrease in the number of Jobless claims published by the Labor Statistics Bureau, which is a sub-unit of the Ministry of Labor, and the increase in private sector employment announced by the ADP Research Institute, is shown in the chart above. This was followed by Purchasing Managers’ Index (PMI) data recorded by the Institute of Supply Management (ISM), which shows the performance of manufacturing and non-manufacturing (construction, service) production, which are the driving sectors of the economy, following a strong recovery in June and August. It can be supported by losing momentum above the threshold value of 50.0 points in months, indicating an expansion on a monthly basis. In other words, it can be explained that the managers of the sector engaged in manufacturing and non-manufacturing production in the US economy are not very willing to create employment.

Recovery in Labor Market will Continue

The disruption of financial support provided in the US in response to the coronavirus crisis in August, creating an appetizing effect on the growth of manufacturing and non-manufacturing producers, which have a significant impact on the performance of economic activity, and creating new jobs, plays a determinant role in the slowdown of the recovery in the labor market. . In addition, while domestic demand is weakening with the interruption of unemployment and direct transfer payments within the scope of support, concerns of reclosing due to the escalation of the Covid-19 and uncertainties in the economic outlook within the framework of waiting for the 59th Presidential election process constitute an important barrier to the revival of the labor market. However, on the other hand, the low-cost packages that the Fed has commissioned for direct support, making the cash flows of the enterprises manageable and the liquidity they will need for growth serve as a catalyst for the recovery of the labor market.

In an environment where the Fed is injecting abundant liquidity with low borrowing costs to support households and businesses, it will not be fortune telling to expect the labor market to continue to recover its losses in a moderate manner, with the interruption of financial management support and uncertainties in the economic outlook. In this context, we think that Nonfarm payrolls will continue to slow down and increase by around 400 thousand in the employment figures to be published by the Labor Statistics Bureau today at 14.30, in addition, the controlled decline of the unemployment rate will continue to the level of 7.7 percent. And, it will be possible to expect the data set to be realized in line with expectations and to strengthen the pressure on financial management based on the new coronavirus incentive package.


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