US labor market, sanctions and the end of free cheese

The main event of yesterday was the publication of data on the US labor market for June. In fact, it was a month of active reopening of the US economy, respectively, signals were expected from the labor market about quick restoration of the economy.

On the one hand, the data on NFPs pleasantly surprised: with a forecast of +3 million in fact, the increase in NFPs amounted to +4.8 million. But on the other hand, if you look at the data in the context of the accumulated effect, it is still extremely negative. The labor market is still minus about 14 million in terms of the NFP and this is very serious. The fact is that we will hardly see the figure of 5 million next month, which means that restoration will take not 2-3 months, but the whole of 2020 and possibly part of 2021.

And all other things being equal, that is, the pandemic will recede and the states will continue to reopen. In the meantime, the US is updating records for the number of new infections, and some states continue to curtail programs to open economies. That is, in fact, next month we will not see figures similar to yesterday, but in general we can see even a negative number in the graph of new jobs created.

In general, such a large-scale crisis in the US labor market, has not yet spoken yet its word for only one reason: government support. Checks from the Government have not yet allowed the following logical chain to be realized: no work, no salary, no money, nothing to pay bills, nothing to buy goods with all the ensuing economic consequences in the form of a banking crisis, falling demand and, consequently, falling producer revenues, etc.

So, we recall that currently July is the last month when the Government provides “free cheese”. If Congress does not vote to extend the current one or adopt a new aid act, then very soon we will see what is the real price of 20 million unemployed for the economy is.

Meanwhile, the U.S. House of Representatives passed a bill imposing sanctions on banks that deal with Chinese officials involved in cracking down on demonstrators for democracy in Hong Kong. Let us look at the reaction of China, since all this is fraught with a new round of rising tension between US and China.