The US non-farm payroll report, which pointed to the loss of 140,000 job positions last month, is expected to indicate an increase by 50K in January. In December, a negative employment change occurred for the first time after April, as a result of the re-closures. This time around 1/3 of December employment losses are expected to return, but this still points to weak employment market dynamics. The unemployment rate is expected to remain at 6.7%.
It is important what kind of recovery will be on the employment side. With Covid measures, in general, the subsectors on the service side, such as accommodation, restaurant, entertainment, suffered serious employment losses. Manufacturing is good and ISM sub-employment components confirm this. Although the relationship of ADP with NFP is too low to be referenced, the private sector employment increase, which was better than expected on weekdays, can be evaluated as positive. We will see a certain amount of job loss return. The weakening of Covid measures by vaccination or cyclically maintains hope that we will have a more normal life in the summer. Then, a faster return will be seen, especially in the employment lost in service. The pace of the employment market's recovery is also important in terms of the fate of the incentive package at this stage.
Incentive package seems to be the most important issue in the USA right now. In turn, there will be many factors that will determine the details of the incentive package. Republicans are trying to impose a $ 600 billion micro-package against Biden's original $ 1.9 trillion large package, which includes assistance for companies, states and most importantly unemployment aid to Americans. Democrats will try to bypass Republicans during the Congress process. Yellen also mentioned the need for an additional package in her acceptance speech. Powell in the Fed's implementation, and Biden and Yellen in economic policy implementation find it worth taking the risks of implementing more and see inadequate policy steps as the main risk. Anyway, without fiscal incentives, the toxic effect of monetary policy on access to credit in the economy will do more harm than good.
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