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On April 26, according to the Wall Street Journal, in order to simplify the negotiations on reciprocal tariffs, US negotiating officials plan to use a new framework developed by the Office of the United States Trade Representative (USTR), which lists major categories of negotiations, such as tariffs and quotas, non-tariff trade barriers, digital trade, product origin principles, economic security and other commercial issues. In these categories, US officials will put forward specific requirements for individual countries, but people familiar with the matter emphasized that this document may also be adjusted at any time. People familiar with the matter said that the United States initial plan is to negotiate with 18 major trading partners in turn over the next two months. The initial plan is to alternately participate in the talks with six countries per week for three weeks (six countries in the first week, another six countries in the second week, and another six countries in the third week) until the deadline of July 8. If US President Trump does not extend the 90-day suspension period he set by then, those countries that cannot reach an agreement will begin to face reciprocal tariffs.On April 26, after the United States announced additional tariffs on goods from many countries, Peruvian business people expressed concerns that the US governments extreme measures would disrupt the global trade order and may even trigger a global economic recession. Alvaro Barrenechea Chavez, vice president of the Peruvian-Chinese Chamber of Commerce, said that the negative impact of the US tariff policy has begun to emerge and hoped that the US government would rethink. Recognizing the importance of countries working together to promote development, I think this is the best way to become a true "world citizen."Market news: Musks xAI company plans to raise about US$20 billion in a financing round.Conflict situation: 1. Ukrainian top commander: Russia tried to use air strikes as a cover to increase ground attacks, but was repelled by Ukraine. 2. Ukrainian Air Force: Russia launched more than 103 drones in the night attack on Ukraine. 3. Local officials said Ukraine launched an attack in the Belgorod region of Russia, killing two people. 4. The local governor said that Russia launched an attack on the Dnipropetrovsk region of Ukraine, killing one person and injuring eight people. Peace talks: 1. Trump: ① The situation between Russia and Ukraine is gradually becoming clear, and they are "very close" to reaching an agreement. ② Ukraine is unlikely to join NATO. ③ Ukraine has not yet signed the rare earth agreement and hopes that the agreement can be signed immediately. ④ It is foreseeable that the United States will conduct commercial cooperation with Ukraine and Russia after reaching an agreement. 2. Russian Foreign Minister: Russia is "ready to reach an agreement on Ukraine." 3. Russian Presidential Assistant Ushakov: Russia and the United States will continue to maintain active dialogue. 4. Russian Presidential Assistant: Putin discussed the possibility of resuming direct negotiations between Russia and Ukraine with the US envoy. 5. The differences between the United States, Europe and Ukraine are clear. The documents show that European countries and Ukraine have raised objections to some of the US proposals to end the Russia-Ukraine conflict. 6. Market news: As part of the peace agreement, the United States asked Russian President Putin to abandon the demilitarization requirement. Other situations: 1. President of Hungarys OTP Bank: We hope to return to all business areas in Russia after the (Russia-Ukraine) conflict ends. 2. Ukrainian President Zelensky: US ground forces are not necessary for Ukraine. 3. Trump said Crimea will remain in Russia, Zelensky: Never recognize it. Agreeing with Trumps view, Crimea cannot be recovered by force. 4. NATO Secretary-General Rutte met with Trump and senior US officials to discuss defense spending, NATO summit, and the Ukrainian conflict.Rising global trade risks, overall policy uncertainty and the sustainability of U.S. debt top the list of potential risks to the U.S. financial system, according to the Federal Reserves latest financial stability report released on Friday. This is the first time the Fed has conducted a semi-annual survey on financial risks since Trump returned to the White House. 73% of respondents said that global trade risks are their biggest concern, more than double the proportion reported in November. Half of the respondents believe that overall policy uncertainty is the most worrying issue, an increase from the same period last year. The survey also found that issues related to recent market turmoil have received more attention, with 27% of respondents worried about the functioning of the U.S. Treasury market, up from 17% last fall. Foreign withdrawals from U.S. assets and the value of the dollar have also risen on the list of concerns.

ADP prospects in the United States: Although it has differentiated from non-agricultural, the popularity of "small non-agricultural" still cannot be underestimated

Oct 26, 2021 11:04

The market currently predicts that ADP's private sector employment will increase by 430,000 in September. The number of ADP employed in July and August was about half of what was expected. The September non-agricultural employment data is the key to the Fed's reduction of debt purchases.



ADP data and non-agricultural data are differentiated


Recently, the monthly correlation between the number of private employment from the Automatic Data Processing Corporation (ADP) and the national data of the Ministry of Labor is weak. However, these data came in a timely manner, released two days earlier than the government data, and they are the largest data in the country outside the non-farm employment report. Currently, analysts expect ADP's US companies to add 430,000 employees in September.

In the past six months, ADP data has failed to provide an early warning of fluctuations in non-agricultural data. In April, the market expected the non-agricultural employment population to increase to 978,000 from 785,000 in March. However, the actual number of non-agricultural employment was beyond market expectations, and only 269,000 new jobs were provided. The ADP employment change report rose from 519,000 to 662,000 that month.


(U.S. ADP employment population historical data)

In July, the non-agricultural employment population increased from 962,000 in June to 1.053 million, the best total since August 2020. In contrast, ADP's July data dropped from 741,000 to 326,000. Finally, the number of non-agricultural employment in the United States fell by 818,000 last month to 235,000. The August ADP data rose slightly from above 326,000 to 374,000.


(History of non-agricultural employment population in the United States)


From another perspective, in the five changes in the past six months, the non-agricultural employment population and ADP moved in the same direction only once, and that was in May. In the long period before this, the trend correlation between non-agricultural employment population and ADP is quite good. Both reports fell sharply in April 2020, followed by a large number of re-hiring in the following three months, and both reported negative values in December last year.

The trend of the U.S. labor market is hard to discern


For months, the US labor market has been publishing some confusing data. The number of jobs offered in August reached a record close to 11 million, while only 235,000 were recruited that month.


(Job vacancy at JOLT's in the US)

The situation of the initial application for unemployment benefits also forms another contrast. Despite the huge number of job vacancies, weak recruitment in August, and non-agricultural employment data in September are expected to be flat, the number of people applying for unemployment benefits for the first time has increased for three consecutive weeks. The number of applicants for unemployment benefits has increased from the lowest level of 312,000 in the week of September 3 to 32,000.

Another strange phenomenon is the unemployment rate. Ignoring the changes in recruitment this year, the rate is declining every month, from 6.3% in January to 5.2% in August.


(U.S. unemployment rate)

Officials and analysts believe that one of the reasons workers are clearly reluctant to return to work is that the Biden administration has extended the period of federal unemployment benefits. These supplementary subsidies expire in early September, so a large number of people are expected to return to work. However, the market does not seem to have strong confidence in employment recovery, and the non-agricultural employment population in September is expected to be only 45,000.

Some analysts also believe that the epidemic and its countermeasures have created a new economic situation, so that standard statistics, indicators, and analysis at best can only reflect part of what is happening in the labor market.

What is the outlook for the Fed's cuts?


The market is waiting for the Fed to confirm its plan to reduce the scale of bond purchases. The information that is good for a quick cut will support U.S. Treasury bond interest rates and the U.S. dollar. The dynamics of the labor market may have changed, but market transactions are based on traditional information and its impact on policy. Strong non-agricultural employment data will make it easier to explain and prove the reduction in debt purchase plans.

The ADP report may not be a reliable indicator of American employment, but as the most valuable data before non-agricultural, investors still inevitably pay attention to it. The changes in this data may still have a certain impact on the market.

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