Following the report, which pointed to 1.6 million employment increase in the US in July, an increase of 1.4 million people is expected in the August non-farm payrolls report, which will be announced tomorrow. Although private sector companies are expected to increase the number of their workforce in August, we have seen that this expectation is not fully met with low ADP data. However, it should be remembered that there is not a very strong relationship between ADP and NFP. It seems that the uncertainty created by the continuity of the high number of Covid-19 cases, the partial lockdown and restrictions due to this will again negatively affect the recruitment decisions.
Although the labor market regains some of the supply it lost in the first months of the pandemic, it is seen that a significant portion will remain idle and returns to work will not occur at the previous level. Recruitment is continuing at a slow pace, and it means that companies also reduce their workforce through employment reduction and digitalization operations within the framework of new business plans. Within the framework of financial plans, economic uncertainty has a negative impact on the employment side. During this period, return to work slows down, as some companies have announced, there may be new layoffs.
Within the framework of the Fed's new plan, it is necessary to foresee that the recovery in the economy will not be a measure of tightening, at least for the foreseeable period. At this point, it was one of the main lines of Powell's speech that the Fed would emphasize structural improvement rather than quantitative improvement in the employment market. In other words, as different than the previous crisis period, the Fed will not tighten when the unemployment rate falls. At least while the current dynamics are still prevalent, and there is an environment where the unemployment rate level without inflation is unspeakable, the Fed will continue to stay away from tightening.
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