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We see no reason to think that the recent volatility in payrolls--the 311K leap in January, followed by the 20K February gain--will continue.
Friday's consumer sentiment data in the two main Eurozone economies were mixed.
Last week's second estimate of GDP reaffirmed that quarter-on-quarter growth declined to 0.1% in Q1--the lowest rate since Q4 2012--from 0.4% in Q4.
Wage growth will be crucial in determining how quickly the MPC raises interest rates this year. So far, it hasn't recovered meaningfully.
CPI inflation looks set to remain below the 2% target this year, driven by sterling's recent appreciation and lower energy prices.
Today brings an array of economic data, including the jobless claims report, brought forward because July 4 falls on Thursday.
The news in Brazil on inflation and politics has been relatively positive in recent weeks, allowing policymakers to keep cutting interest rates to boost the stuttering recovery.
Japan's domestic demand has underperformed in the last three quarters, while exports were strong last year but weakened--due to temporary factors--in Q1.
It's pretty easy to spin a story that the recent core PCE numbers represent a sharp and alarming turn south.
We expect today's first estimate of third quarter GDP growth to show that the economy expanded at a 2.4% annualized rate over the summer.
Yesterday's ECB meeting was comfortably uneventful for markets.
Our base case remains that the slowdown in quarter-on-quarter GDP growth to about zero in Q2 is just a blip, and that the economy will regain momentum in Q3 and sustain it well into 2020.
We still don't have the complete picture of what happened to EZ consumers' spending in Q1, but the initial details suggest that growth acceleretated slightly at the start of the year.
The renewed slide in oil prices in recent weeks will crimp capital spending, at the margin, but it is not a macroeconomic threat on the scale of the 2014-to-16 hit.
Yesterday's barrage of survey data were a mixed bag. The composite EZ PMI edged higher in May to 51.6, from 51.5 in April, but the details were less upbeat, and also slightly confusing.
Core durable goods orders have not weakened as much as implied by the ISM manufacturing survey, as our first chart shows, but it is risky to assume this situation persists.
Neither of the major economic reports due today will be published on schedule.
Yesterday's labour market data brought further signs that wage growth is recovering from its early 2017 dip.
Public borrowing has continued to fall more rapidly than anticipated in the latest official plans.
The stage is set for the Fed to ease by 25bp today, but to signal that further reductions in the funds rate would require a meaningful deterioration in the outlook for growth or unexpected downward pressure on inflation.
The headline employment cost index has been remarkably dull recently, with three straight 0.6% quarterly increases. The consensus forecast for today's report, for the three months to December, is for the same again.
The German economy's engine room continues to stutter.
We're nudging up our forecast for today's August payroll number to 180K, in the wake of the ADP report.
The small rise in the Markit/CIPS services PMI to 51.3 in February, from 50.1 in January, came as a relief yesterday.
Taken at face value, the retail sales data in the euro area suggest that consumers' spending hit a brick wall at the end of 2018.
If you need more evidence that the U.S. economy is bifurcating, look at the spread between the ISM non- manufacturing and manufacturing indexes, which has risen to 3.5 points, the widest gap since September 2016.
Our below-consensus 125K forecast for today's February payroll number is predicated on two ideas.
Britain's housing market appears to be going from bad to worse.
Japan's average monthly labour earnings growth tumbled to 0.9% year-over-year in August, from 1.6% in July. This is not a disaster.
The recent slowdown in labour cash earnings growth in Japan halted in September.
Productivity likely rose by 1.7% last year, the best performance since 2010.
Data yesterday showed that EZ consumers' spending was off to a bad start in the third quarter.
The Chancellor's decision immediately to spend all the proceeds from the OBR's upgrade to its projections for tax receipts appears to leave his plans exposed to future adverse revisions to the economic outlook.
Many investors probably glossed over yesterday's barrage of data in the Eurozone, for fear of being caught out by another swoon in Italian bond yields. Don't worry, we are here to help.
The national accounts look set to show that GDP growth in the fourth quarter was even stronger than previously estimated. Earlier this month, quarter-on-quarter growth in construction output in Q4 was revised up to 1.2%, from 0.2%. As a result, construction's contribution to GDP growth will rise by 0.07 percentage points.
Data yesterday showed that Momentum in the EZ retail sector stumbled through middle of Q2.
The economic and political backdrop to this week's Monetary Policy Committee meeting is significantly more benign than when it last met on September 19.
Yesterday's EZ consumers' spending data were mixed. Retail sales in the euro area fell by 0.3% month-to-month in May, extending the slide from a revised 0.1% dip in April.
We've previously highlighted the pro-cyclical elements of the BoJ's framework, but it's worth repeating, when an economic shock comes along.
We were worried about downside risk to yesterday's ADP employment measure, but the 67K increase in November private payrolls was at the very bottom of our expected range.
November's labour market report provided timely reassurance, after last week's downside data surprises, that the economy did not grind to a halt at the end of last year.
The chance of a zero GDP print for the first quarter diminished--but did not die--last week when the president signed a bill granting full back pay to about 300K government workers currently furloughed.
In theory, the headline labour market data in France should be a source of comfort and support for the new government.
Today's labour market report likely will show that employment continued to grow briskly over the summer, but that wage gains still are lagging well behind inflation.
The rate of deterioration in the labour market remains gradual enough for the MPC to hold back from cutting Bank Rate over the coming months.
Another month, another strong set of labour market data which undermine the case for the MPC to cut Bank Rate, provided a no-deal Brexit is avoided.
The partial government shutdown is now the longest on record, with little chance of a near-term resolution.
The over-hyped mystery of the gap between the hard and soft data in the industrial economy has largely resolved itself in recent months.
Brazil's industrial sector keeps losing momentum, despite interest rates at record lows and improving confidence.
The stand-out development in yesterday's labour market report was the drop in the he adline, three-month average, unemployment rate to just 4.0% in June--its lowest rate since February 1975--from 4.2% in May.
April's labour market data show that slack in the job market is no longer declining, while wage growth still isn't recovering. As a result, we no longer think that the MPC will raise Bank Rate in August and now expect the Committee to stand pat until the first half of 2019.
Households have been a rock of stability over the last two years, increasing their real spending at a steady rate of 1.8% year-over-year, while the rest of the economy collectively has ground to a halt.
The 20K increase in February payrolls is not remotely indicative of the underlying trend, and we see no reason to expect similar numbers over the next few months.
We already know that the key labor market numbers in today's May NFIB survey are strong.
We have been rigorous in using the word nascent whenever referring to Japan's wage-price spiral.
Today's JOLTS survey covers August, which seems like a long time ago. But the report is worth your attention nonetheless.
As we reach our Sunday afternoon deadline, Hurricane Irma is pounding Florida's west coast with an intensity not seen since Andrew, in 1992.
Oil prices remain sticky, poised to hover close to a four-year high for the rest of the year.
Apart from a slew of economic data--see here and here--two important things happened in Germany last week.
The Brexit-related slump in corporate confidence finally has taken its toll on hiring.
July's retail sales figures--the first official data for Q3--provided a reassuring signal that consumers can be counted on to drive the economy as the Brexit deadline nears.
While financial markets remain obsessed with the Brexit saga, January's labour market data provided more evidence yesterday that the economy is coping well with the heightened uncertainty.
Consensus expectations for August's labour market data, released today, look well grounded.
The headline employment numbers masked an otherwise sub-par December labour market report.
The recent jobless claims numbers have been spectacularly good, with the absolute level dropping unexpectedly in the past two weeks to a 43-year low. The four-week moving average has dropped by a hefty 14K since late August.
One of the key characteristics of this euro area business cycle has been near-zero inflation due to structurally weak domestic demand and depressed prices for globally traded goods and commodities. This has supported real incomes, despite sluggish nominal wage growth.
Economic growth in France has been the key downside surprise in the Eurozone this year.
Consumer sentiment in the euro area has slipped this year, though the headline indices remain robust overall.
The chances of the first phase of the Brexit saga concluding soon declined sharply last week.
The Eurozone's external surplus weakened at the start of Q3.
Expectations that the MPC will cut Bank Rate at its meeting on January 30 received a further shot in the arm at the end of last week, when December's retail sales figures were released.
The weekly jobless claims numbers tend to be choppy around the turn of the year, and our take on the seasonal adjustments points to a clear increase in today's report, for the week ended January 11, even without the impact of the government shutdown.
Yesterday's labour market figures revealed that employment growth has picked up this year, despite the shadow cast over the medium-term economic outlook by Brexit. The 122K, or 0.4%, quarter-on-quarter rise in employment in Q1 was the biggest since Q2 2016.
We look for yet another unanimous vote by the MPC to keep Bank Rate at 0.75% on Thursday, with no new guidance on the near-term outlook.
The labour market remains healthy enough to persuade the MPC to keep its powder dry over the coming months.
Data yesterday added further evidence of a slow recovery in Eurozone auto sales.
Trouble is brewing in the core inflation data, despite the benign-looking 0.17% increase in the June report, released Friday. If you annualize that rate indefinitely, core inflation will reach a steady state of 2.1%, so the Fed never needs to raise rates. Alas this only makes sense if you think that single monthly CPI numbers tell the whole truth, and that the fundamental forces acting on inflation are stable. Neither of these propositions is remotely true.
Today's labour market report looks set to be a mixed bag, with growth in employment remaining strong, but further signs that momentum in average weekly wages has faded.
Brazil's December economic activity index, released last week, showed that the economy ended the year on a relatively weak footing. The IBC-Br index, a monthly proxy for GDP, fell 0.3% month- to-month, pushing down the adjusted year-over- year rate to 0.3%, from a downwardly-revised 0.7% increase in November.
The details of the substantial pay raises being offered to some 18K JP Morgan employees over the next three years are much less important than the signal sent by the company's response to the tightening labor market. In an economy with 144M people on payrolls, hefty raises for JP Morgan employees won't move the needle in the hourly earnings data.
We have argued consistently for some time that the next year will bring a clear acceleration in U.S. wage growth, because the unemployment rate has fallen below the Nairu and a host of business survey indicators point to clear upward wage pressures. Nominal wage growth has been constrained, in our view, by the unexpected decline in core inflation from 2012 through early 2015, which boosted real wage growth and, hence, eased the pressure from employees for bigger nominal raises.
It's tempting to conclude that the pick-up in year over-year growth in average weekly wages, excluding bonuses, to a three-year high of 3.1% in July, from 2.8% in June, signals that employees' bargaining power has strengthened and that a sustained wage recovery now is under way.
As recently as late 2008, the share of employee compensation in GDP was slightly higher than the average for the previous 20 years. But it would be wrong to argue, therefore, that the squeeze on labor is a phenomenon only of the past few years. It's certainly true that labor's share dropped precipitously from 2009 through 2011, and has risen only marginally since then.
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