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editor’s note:recently, the adjustment of us economic data has attracted global attention. on september 7, the us department of labor released the august non-farm employment report on friday, showing that the number of new non-farm employment was 142,000, far below the expected 160,000. the employment data for july was significantly revised down from 114,000 to 89,000, a downward revision of nearly 22%. it is worth noting that the initial value of the july non-farm employment data released in august was not as good as expected. previously, the market expected the july non-farm employment data to be 175,000, and the degree of deviation from expectations set a record in recent years.

if we look back at recent non-farm data, it seems that large-scale revisions to us non-farm data have become the norm in recent times. data released by the us department of labor on july 5 showed that the us bureau of labor statistics revised the number of new non-farm jobs in april from 165,000 to 108,000; the number of new non-farm jobs in may was revised from 272,000 to 218,000. after the revision, the total number of new jobs in april and may decreased by 111,000 compared with before the revision. the downward revision accounted for 25.4% of the non-farm data released in the previous two months. on august 21, the us department of labor revised down the new non-farm employment data from april 2023 to march 2024. the number of new jobs in the united states decreased by 818,000 from the previous estimate, and the downward revision accounted for about 28.2% of the original data estimate.

regarding such a large-scale adjustment in the united states, observer.com contacted mr. deng haiqing, deputy general manager and chief investment officer of avic fund, to discuss the reasons for the adjustment of us economic data and the upcoming interest rate cut by the federal reserve.

【text/observer.com tang xiaofu】

guanchazhe.com: from your perspective, what exactly is wrong with the us non-farm payrolls data? why are there such large and continuous revisions? is it related to the us election?

deng haiqing:the million-level revision of us non-farm payrolls is caused by many reasons:

first, the generation of non-agricultural data depends on two parts: enterprise survey and household survey. the data provided by enterprises may be delayed or inaccurate, and household survey is a sampling survey and may also be inaccurate.

second, the employment environment in the united states has become more complicated. for example, a large number of temporary employment and unemployment, part-time work, remote work, frequent corporate bankruptcies, etc. during the epidemic have made it more difficult to compile employment data.

third, illegal immigrants have an important impact on the us job market (including non-agricultural indicators). the initial non-agricultural value includes illegal immigrant employment data, and then the non-agricultural data is revised according to qcew (preliminary report of non-agricultural employment and wages census), which is derived from unemployment insurance tax records. this means that the revised value will exclude illegal immigrant employment data.

fourth, the impact of the us election. it cannot be ruled out that the us department of labor will manipulate the data for the support rate of presidential candidates.

observer.com: we have previously noticed that from august 2023 to august 24, the us adp employment data exceeded expectations only in three months (december 2023, march and april 2024), while the non-farm data fell short of expectations only in three months (october 2023, april and july 2024). how do you view the gap between adp data and non-farm data from a statistical perspective?

deng haiqing:first, there are differences in statistical methods. adp data only surveys employment in the private sector and has a limited sample size (about 500,000 companies). non-farm data is a more comprehensive and authoritative indicator of the employment market. the two differ in terms of statistical objects, sample size, sampling frequency, and the industries and sectors covered.

second, new changes have occurred in the u.s. job market after the epidemic. during and after the epidemic, there have been a large number of temporary employment and unemployment, part-time work, remote work, etc. in the united states. non-agricultural employment statistics are more employed people with stable jobs, and adp may be more realistic in depicting the employment situation in industries with more temporary workers.

guanchazhe.com: considering that the adp data only includes private sector employment, while the non-farm data includes both private and government employment. considering the changes in the expansion rate of the us national debt and the proportion of us government spending in gdp and its driving effect on the economy, does the successive downward revision of data mean that the us government's debt-driven economic growth policy has encountered challenges?

deng haiqing:the apparent prosperity of the us economy mainly relies on the substantial expansion of fiscal spending and deficits. after the covid-19 pandemic, the us government has carried out fiscal expansion by monetizing fiscal deficits, which has supported the growth of the us economy. the essence of biden's economics is a thorough "debt-driven prosperity."

taking the m2/gdp ratio of the united states since the 1960s as an indicator of monetary efficiency, it can be found that after 2019, especially since 2020, the gdp corresponding to the unit currency of the united states has dropped significantly, and the monetary efficiency has dropped significantly, corresponding to a decrease in production efficiency rather than an increase. as the us government debt continues to break through the ceiling and the struggle between the two parties intensifies in the election year, it is becoming increasingly difficult to increase the fiscal deficit. the so-called prosperity brought about by the monetization of the fiscal deficit is unsustainable, economic growth is declining, and the market is engaged in "recession trading."

guancha.com: recently, the longest inversion cycle in the history of us dollar interest rates has ended. the interest rates of two-year and ten-year us dollar debts have completed the transition from inversion to positive. before the economic recession since 1980, the us treasury yield curve has changed from an inverted state to a positive state. however, another view is that the yield curve is now invalid as a recession indicator and is completely meaningless as a market signal. what do you think about this? why?

deng haiqing:with the change of the federal reserve's monetary policy framework and the loss of its independence, the indicative significance of traditional recession indicators has indeed declined in history. but in this case, the u.s. treasury yield curve has changed from an inverted state to a positive state, reflecting the capital market's expectations that the u.s. economy will enter a recession cycle and the federal reserve will enter a rate cut cycle. the apparent prosperity of the u.s. economy after the epidemic mainly depends on the substantial expansion of fiscal spending and deficits. against the backdrop of intensified bipartisan struggles and limited fiscal expansion, the risk of the u.s. economy entering a recession is rising sharply.

guancha.com: citigroup's short-term interest rate trading department said that if the fed sees a weak labor market, it will aggressively relax its policy. in contrast, the current market expectation for a rate cut this year is about 100 basis points. what do you think of the fed's potential rate cuts? and do you expect the rate cuts to achieve the fed's goal of stimulating employment?

deng haiqing: for now, inflation in the united states is still higher than the fed's policy target. at the same time, although the u.s. labor market continues to cool, it still maintains a certain degree of resilience. as far as the current situation is concerned, the fed does not need to cut interest rates aggressively to stabilize employment. it may take a more "step-by-step" approach and decide the next rate cut by continuously paying attention to and evaluating changes in inflation and the job market. in the absence of new risk factors, the fed may not take aggressive actions in the early stages of the rate cut cycle.

observer.com: considering that the size of the federal reserve's balance sheet has returned to the level during the 2020 epidemic, will the federal reserve's policy complete the shift from balance sheet reduction to balance sheet expansion in the short term?

deng haiqing:under the baseline assumption, we expect that the fed will not take aggressive actions in the early stages of the rate cut cycle. at the same time, the rate cut will effectively support the capital market and ease market liquidity. if the us economy does not experience a sharp recession,american financethe market's systemic risks are likely to be controllable, and there is little need for the federal reserve to significantly expand its balance sheet in the short term.

guancha.com: the bank of japan has recently continued to make hawkish remarks, expressing its desire to raise interest rates and saying that there is no preset upper limit to the rate hike. in the plunge in the us and japanese stock markets last month, the expectation that the yen would raise interest rates by 15 basis points played an extremely important role, affecting the carry trade between the yen and the dollar. after that, the bank of japan said it would postpone the rate hike, which temporarily calmed the market panic.

the federal reserve will hold its september interest rate meeting in the early morning of september 19th, beijing time, and the bank of japan will hold its interest rate meeting on the 20th. if the expectations of a us dollar rate cut and a japanese yen rate hike are realized one after another, will it cause chaos in japanese yen liquidity and us-japan carry trades again? and then trigger violent fluctuations in the us and japanese stock markets?

deng haiqing:judging from the motives of the bank of japan, the domestic economic and financial situation in japan does not support further interest rate hikes. the japanese government leverage ratio exceeds 220%, the highest among major economies in the world. raising interest rates will significantly increase the burden on japan's finances. moreover, since the second quarter of 2023, japan's gdp growth rate has begun to decline, the actual growth rate of residents' consumption is now negative, and the nominal growth rate is also continuing to decline, making it difficult for domestic demand to continue.

the japanese stock market has started to fall since it hit an all-time high of 42,224.02 points on july 11. the interest rate hike may repeat the mistakes of the 1980s and 1990s that burst the bubble and triggered a stock market crash (in retrospect, "black monday" did occur on august 5).

japan's current gdp growth rate is mainly maintained by external demand and exports. if a strong interest rate hike leads to a sharp appreciation of the yen, it will have a serious impact on exports. in july, due to the huge pressure of yen depreciation, the japanese government consumed a lot of foreign reserves to maintain the exchange rate, and was finally forced to raise interest rates. looking ahead, as the us dollar enters a weak cycle, the pressure on the yen exchange rate is relieved, and the necessity and possibility of the bank of japan raising interest rates will decrease.

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