Search Results: 154
Pantheon Macroeconomics aims to be the premier provider of unbiased, independent macroeconomic intelligence to financial market professionals around the world.
Sorry, but our website is best viewed on a device with a screen width greater than 320px. You can contact us at: firstname.lastname@example.org.
154 matches for " non-manufacturing":
The rebound in the ISM non-manufacturing index in February was in line with our forecast, but behind the strong headline, the employment index dropped to an eight-month low.
Last week's strong ISM manufacturing survey for November likely will be followed by robust data for the non-manufacturing sector today, but the headline index, like its industrial counterpart, likely will dip a bit.
The 6.4-point rebound in the May ISM non-manufacturing employment index, to a very high 57.8, supports our view that summer payroll growth will be strong. On the face of it, the survey is consistent with job gains in excess of 300K, as our first chart shows, but that's very unlikely to happen.
The headline ISM non-manufacturing index is not, in our view, a leading indicator of anything much. The survey covers a broad array of non manufacturing activity, including mining, healthcare, and financial services, but most of the time it tends to follow the track of real core retail sales, as our first chart shows.
We don't directly plug the ADP employment data into our model for the official payroll number. ADP's estimate is derived itself from a model which incorporates lagged official payroll data, because payrolls tend to mean-revert, as well as macroeconomic variables including oil prices, industrial production and jobless claims -- and actual employment data from firms which use ADP's payroll processing services.
The simultaneous decline in both ISM indexes was a key factor driving markets to anticipate last week's Fed easing.
Markets and the commentariat seemed not to like the April ADP employment report yesterday but we are completely indifferent. We set out in detail in yesterday's Monitor the case for expecting a below consensus ADP reading--in short, the model used to generate the number includes lagging official data, some of which were hugely depressed by the early Easter--so it does not change our 200K forecast for tomorrow's official number.
The shock of the weak May payroll report means that the June numbers this week will come under even greater scrutiny than usual. We are not optimistic that a substantial rebound is coming immediately. The headline number will be better than in May, because the 35K May drag from the Verizon strike will reverse.
In one line: Better, but still much lower than it should be, thanks to the trade war.
In one line: Headline weakness hides employment rebound, but is it real?
In one line: Not as good as the headlines.
In one line: Before the deluge, everything was dry.
In one line: The hit from tariffs on consumer goods has gone, mostly.
China's official manufacturing PMI was unchanged at 50.2 in December, marking a weak end to the year. But it could have been worse; we had been worried that the return to above-50 territory in November had been boosted by temporary factors. December's print allays some of those fears.
In one line: Terrible.
In one line: Not as good as it looks.
Most of the leading indicators of payroll growth have rebounded in recent months, with the exception of the Help Wanted Online. Our first chart shows that the NFIB's measure of hiring intentions and the ISM non-manufacturing employment index have returned to their cycle highs, while the manufacturing employment index has risen substantially from its late 2015 low. The Help Wanted Online remains very weak, but it might have been depressed by increased prices for job postings on Craigslist.
Any model of payrolls based on the usual indicators--jobless claims, ISM hiring, NFIB hiring, and other sundry surveys--right now points to payroll growth at 250K or better. Indeed, the ISM non-manufacturing report on Wednesday is consistent with payroll growth closer to 400K, and the lagged NFIB hiring intentions number points to 300K. Yet the consensus forecast for today's October report is just 182K. Why so timid?
We chose last week to ignore the payroll warning signal from the ISM non-manufacturing employment index, which rolled over in January and February, because the danger seemed to have passed. The ISM is not always a reliable indicator--the drop in the index in early 2014 was not replicated in the official data, but the plunge in early 2015 was--and usually it operates with a very short lag, just a month or two.
The simultaneous weakening of the ISM manufacturing and non-manufacturing surveys in recent months is one of the more disconcerting shifts in the recent macro data.
The key data originally scheduled for today--ADP employment and the ISM non-manufacturing survey, and the revised Q3 productivity and unit labor costs-- have been pushed to Thursday because the federal government will be closed for the National Day of Mourning for president George H. W. Bush.
The elevated September ISM non-manufacturing index reported yesterday--it dipped to 56.9 but remains very high by historical standards--again served to underscore the depth of the bifurcation in the economy. The services sector, boosted by the collapse in gasoline prices and the strong dollar, is massively outperforming the woebegone manufacturing sector.
Tankan reinforces our impression of a nasty Q2. China's manufacturing PMIs show why the authorities are eager for a trade deal. China's non-manufacturing sector holds steady for now. Korean exports disappointed in June, but this probably is as bad as it will get. Ignore Korea's volatile PMI readings... sentiment is improving gradually.
China PMI chimes with our GDP downgrade last week. China's non-manufacturing PMI weakest on construction. Japan's MoF capex numbers point to Q4 GDP downgrade. Ignore the consensus-beating headline, Korean exports were abysmal in February, calendar effects aside. The virus now has infected Korea's PMI; expect business surveys to get a lot worse.
China's manufacturing PMIs suggest the private sector is recovering ahead of SoEs. China's non-manufacturing PMI again masks construction/services cross currents. Japan's industrial production continues to languish. OK so now Japanese households are front-loading spending. Korean IP corrects from the bumper July; the momentum from the Q2 recovery is waning.
China's manufacturing PMIs turn less grim, but look unsupported, for now. China's non-manufacturing PMI receives a one-off singles day boost. Japan's capex data suggests Q3 upgrade. Net trade is shaping up to be a drag on Q4 GDP, as Korean exports remained weak in November. Korea's exit from deflation is complete, thanks largely to more favourable base effects. Korea's PMI jumps in November... and that's before the likely sentiment boost from normalising ties with Japan.
China's PMIs surprised the consensus forecasts to the downside for February. The manufacturing PMI dropped to 50.3 in February from 51.3 in January, while the non-manufacturing PMI fell to 54.4 from 55.3 in January.
China's manufacturing PMI was poised for major disappointment... the trade war impact is clear. Don't be fooled by the relative stability of China's non-manufacturing PMI. Japan's March unemployment uptick was early; April was payback. Japan's CPI inflation has peaked. Japan's industrial production ticks up after extreme weakness; don't hold your breath for the recovery. Japan's consumers in poor shape, but maybe it's not that bad. The upswing in Korean industrial production likely to take a breather this month. The BoK holds firm, despite rising calls for a rate cut.
The headline May ISM non-manufacturing index today likely will mirror, at least in part, the increase in the manufacturing survey, reported Friday.
Our composite index of employment indicators, based on survey data and the official JOLTS report, looks ahead about three months.
The ADP employment report suggests that the hit to payrolls from Hurricane Florence was smaller than we feared, so we're revising up our forecast for the official number tomorrow to 150K, from 100K.
Today brings the first glimpse of the post-hurricane employment picture, in the form of the September ADP report.
Today's December international trade numbers could easily signal a substantial upward revision to fourth quarter GDP growth. When the GDP data were compiled, the December trade numbers were not available so the BEA had to make assumptions for the missing numbers, as usual.
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.
We're pretty sure that the unemployment rate didn't drop by 0.3 percentage points in November. We're pretty sure hourly earnings didn't fall by 0.1%. And we're pretty sure payrolls didn't rise by 178K. All the employment data are unreliable month-to-month, with the wages numbers particularly susceptible to technical quirks.
The apparently imminent imposition of 25% tariffs on imported steel and 10% on aluminum does not per se constitute a serious macroeconomic shock.
It is possible that the broad-based softness of September payrolls captures a knee-jerk reaction on the part of employers, choosing to wait-and-see what happens to demand in the wake of stock market correction. But that can't be the explanation for the mere 136K August gain, because the survey was conducted before the market rolled over. Even harder to explain is the hefty downward revision to August payrolls, after years of upward revisions. All is not yet lost for August--the last time the first revision to the month was downwards, -3K in 2010, the second revision was +56K--but we aren't wildly optimistic.
The ADP employment report for September showed private payrolls rose by 135K, trivially better than we expected.
Labor demand, as measured by an array of business surveys, clearly slowed from the cycle peak, recorded late last year.
Fed Chair Yellen yesterday reinforced the impression that the bar to Fed action in December, in terms of the next couple of employment reports, is now quite low: "If we were to move, say in December, it would be based on an expectation, which I believe is justified, [our italics] that with an improving labor market and transitory factors fading, that inflation will move up to 2%." The economy is now "performing well... Domestic spending has been growing at a solid pace" making a December hike a "live possibility." New York Fed president Bill Dudley, speaking later, said he "fully" agrees with Dr. Yellen's position, but "let's see what the data show."
The underlying trend in payroll growth ought to be running at 250K-plus, based on an array of indicators of the pace of both hiring and firing. The past few months' numbers have fallen far short of this pace, though, for reasons which are not yet clear. We are inclined to blame a shortage of suitably qualified staff, not least because that appears to be the message from the NFIB survey, which shows that the proportion of small businesses with unfilled positions is now close to the highs seen in previous cycles. If we're right, payroll growth won't return to the 254K average recorded in 2014 until the next cyclical upturn, but quite what to expect instead is anyone's guess.
Fed Chair Powell yesterday said about as little as he could without appearing to ignore the turmoil in markets since the President announced his intention to apply tariffs to imports from Mexico: "We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective."
The comforting 183K increase in February private payrolls reported by ADP yesterday likely overstates tomorrow's official number.
We don't believe that payrolls rose only 138K in May. History strongly suggests that when the May payroll survey is conducted relatively early in the month, payroll growth falls short of the prior trend.
We were surprised to see Japan's services PMI edging up to 51.9 in June, from 51.7 in May. We attributed apparent service sector resilience in April and May to the abnormally long holiday this year.
China's PMIs point to softening activity in Q3. The Caixin services PMI fell to 52.8 in July, from 53.9 in June.
The fundamentals underpinning our forecast of solid first half growth in consumers' spending remain robust.
The Tankan survey--published on Monday--points to still buoyant sentiment, a further tightening of the labour market, and building inflation pressures.
The ADP employment report was on the money in October at the headline level--it undershot the official private payroll number by a trivial 6K--but the BLS's measure was hit by the absence of 46K striking GM workers from the data.
We can think of at least three reasons for the apparent softness of ADP's March private sector employment reading.
All the main surveys of business activity in Q1 now have been released and they present a uniformly downbeat picture.
The Bank of Korea's two main monthly economic surveys were very perky in January.
Markets see a strong possibility, though not a probability, that the BoJ will cut rates on Thursday.
The Fed surprised no-one yesterday, leaving rates on hold, saying nothing new about the balance sheet, and making no substantive changes to its view on the economy. The statement was tweaked slightly, making it clear that policymakers are skeptical of the reported slowdown in GDP growth to just 0.7% in Q1: "The Committee views the slowing in growth during the first quarter as likely to be transitory".
The official payroll numbers seem not to be consistently affected by seasonal adjustment problems when Easter falls in March, probably because the earliest possible date for the holiday, the 23rd, comes long after the payroll data are captured. The BLS data cover the week of the 12th.
Mean-reversion is a wonderful thing; it's what gives the ADP employment report the wholly unjustified appearance of being a useful leading indicator of payroll growth. Over time, the best single forecast of payroll gains or losses in any particular month is whatever happened last month.
We aren't in the business of trying to divine the explanation for every twist and turn in the stock market at the best of times, and these are not the best of times.
The least-bad way to forecast the ADP employment number is to look at the official private payroll number for the previous month. ADP's methodology generates employment numbers from a model incorporating lagged data from the Bureau of Labor Statistics as well as information from companies which use ADP for payroll processing.
The unexpectedly robust 128K increase in October payrolls--about 175K when the GM strikers are added back in--and the 98K aggregate upward revision to August and September change our picture of the labor market in the late summer and early fall.
We're nudging up our forecast for today's August payroll number to 180K, in the wake of the ADP report.
In the wake of yesterday's ADP report, which showed private payrolls rising by only 163K, we have pulled down our forecast for today's official number to 170K.
We were happy to see the 255K gain in July payrolls, but we remain nervous about the sustainability of such strong numbers. The jump in employment was very large relative to some of the key survey-based indicators of the pace of hiring, even after allowing for the 29K favorable swing in the birth/ death model, compared to a year ago, and the 27K jump in state and local government education jobs, likely due to seasonal adjustment problems
One bad month proves nothing, but our first chart shows that October's auto sales numbers were awful, dropping unexpectedly to a six-month low.
We have argued frequently that the ADP employment report is not a reliable advance payroll indicator--see our Monitor of May 4, for example-- so for now we'll just note that it is generated by a regression model which includes a host of nonpayroll data and the official jobs numbers from the previous month. It is not based solely on reports from employers who use ADP for payroll processing, despite ADP's best efforts to insinuate that it is.
We raised our forecast for today's January payroll number after the ADP report, to 200K from 160K.
The jump in oil prices over the past two trading days eventually will lift retail gasoline prices by about 35 cents per gallon, or 131⁄2%.
We're hearing a good deal of speculation about the dotplot after next week's FOMC meeting, with investors wondering whether the median dot will rise in anticipation of the increased inflation threat posed by substantial fiscal loosening under the new administration. We suspect not, though for the record we think that higher rate forecasts could easily be justified simply by the tightening of the labor market even before any stimulus is implemented.
The contrast between November's very modest 67K ADP private payroll number and the surprising 254K official reading was startling, even when the 46K boost to the latter from returning GM strikers is stripped out.
The reported drop in mortgage applications over the holidays is now reversing, not that it ever mattered.
The collapse in capital spending in the oil sector last year was the biggest single drag on the manufacturing sector, by far. The strong dollar hurt too, as did the slowdown in growth in China, but most companies don't export anything. Capex has fallen in proportion to the drop in oil prices, so our first chart strongly suggests that the bottom of the cycle is now very near.
We have two competing explanations for the unexpected leap in November payrolls. First, it was a fluke, so it will either be revised down substantially, or will be followed by a hefty downside correction in December.
Markets clearly love the idea that the "Phase One" trade deal with China will be signed soon, at a location apparently still subject to haggling between the parties.
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.
With the FOMC decision now just seven days away, the forcefulness of recent Fed speakers has led many analysts to argue that only a spectacularly bad payroll report, or an external shock, can prevent a rate hike next week. External shocks are unpredictable, by definition, and we think the chance of a startlingly terrible employment report is low, though substantial sampling error does occasionally throw the numbers off-track.
Everything but the weather points to a strong headline payroll number for March. Our composite leading payroll indicator has signalled robust job growth since last fall, and the message for March is very clear.
China's official PMIs for January, due out tomorrow, will give the first indications of how the economy started the year.
We are not concerned by the very modest tightening in business lending standards reported in the Fed's quarterly survey of senior loan officers, published on Monday.
It's hard to overstate the geopolitical importance of Friday's assassination of Qassim Soleimani, architect of Iran's external military activity for more than 20 years and perhaps the most powerful man in the country, after the Supreme Leader.
Productivity likely rose by 1.7% last year, the best performance since 2010.
Behind all the talk of slowdowns and Fed pauses, we see no sign that the labor market is loosening beyond a very modest uptick in jobless claims, and even that looks suspicious.
October payrolls were stronger than we expected, rising 128K, despite a 46K hit from the GM strike.
The ADP measure of private employment hugely overstated the official measure of payrolls in September, in the wake of Hurricane Irma, but then slightly understated the October number.
Today's June ADP employment report likely will undershoot the 183K consensus, but we then expect the official payroll number tomorrow to surprise to the upside.
First, a deep breath: June payrolls, with a margin of error of +/-107K, missed the consensus by 10K. Adding in the -60K revisions and the miss is still statistically insignificant. The story, therefore, is that there is no story. Even relative to our more bullish forecast, the miss was just 37K. Nothing bad happened in June. But we hav e to acknowledge that payroll growth has now undershot the pace implied by the NFIB's hiring intentions number--lagged by five months--in each of the past four months. In June, the survey pointed to a 320K jump in private employment, overshooting the actual print by nearly 100K.
Barring some sort of out-of-the-blue shock, we are much more interested in the hourly earnings data today than the headline payroll number. The key question is the extent to which wages rebound after being depressed by a persistent calendar quirk in both February and March.
Productivity growth reached the dizzy heights of 1.8% year-over-year in the second quarter, following a couple of hefty quarter-on-quarter increases, averaging 2.9%.
The wide spread in first quarter GDP growth "trackers"--which at this point are more model and assumption than actual data--is indicative of the uncertainty surrounding the international trade and inventory components.
We think today's February payroll number will be reported at about 140K, undershooting the 175K consensus.
Revisions to the first quarter productivity numbers, due today, likely will be trivial, given the minimal 0.1 percentage point downward revision to GDP growth reported last week.
We are not worried, at all, by the slowdown in headline payroll growth to 157K in July from an upwardly-revised 248K in June.
Short of saying "We're going to hike rates in two weeks' time", Dr. Yellen's view of the immediate economic and policy outlook, set out in her speech yesterday, could hardly have been clearer. Yes, she threw in the usual caveats: "...we take account of both the upside and downside risks around our projections when judging the appropriate stance of monetary policy", and saying the FOMC will have to evaluate the data due ahead of this month's meeting, but her underlying message was straightforward.
The number of Covid-19 cases is increasing at a faster rate, though 89% of the new cases reported Saturday were in China, South Korea, Italy and Iran.
Just as we turned more positive on the labor market, following three straight months of payroll gains outstripping the message from an array of surveys, the Labor Department's JOLTS report shows that the number of job openings plunged in November.
We're reasonably happy with the idea that business sentiment is stabilizing, albeit at a low level, but that does not mean that all the downside risk to economic growth is over.
If the Fed really believed its own rhetoric--"Inflation is expected... to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further"--it would have raised rates yesterday, given the very long lags between policy action and the response from the real economy.
April's impressive-looking retail sales numbers--the headline jumped 1.3%, with non-auto sales up 0.8%--were boosted by two entirely separate factors, one of which will play no p art in May and one which will offer very modest support. The key lift in April came from the very early Easter, which confounded the seasonal adjustments, as it usually does.
This is the final Monitor before we head out for our spring break, so we have added a page in order to make room to preview the employment report due next Friday, April 4. We expect a solid but unspectacular 175K increase in payrolls, slowing from February's unsustainable 242K, but still robust.
The Monetary Policy Board of the Bank of Korea is likely to keep its benchmark base rate unchanged, at 1.25%, at its meeting this week.
Japan's CPI inflation was stable at 0.2% in October, despite the sales tax hike, thanks to a combination of offsetting measures from the government and a deepening of energy deflation.
In our Webinar--see here--we laid out scenarios for Chinese GDP in Q1 and for this year.
The weaker is the economy over the next few months, the more likely it is that Mr. Trump blinks and removes some--perhaps even all--the tariffs on Chinese imports.
Japan is one of the countries most exposed to economic damage from the coronavirus.
Yesterday's stock market bloodbath stands in contrast to the U.S. economic data, most of which so far show no impact from the Covid-19 outbreak.
We are still annoyed, for want of a better word, by the May payroll numbers. Specifically, we're annoyed that we got it wrong, and we want to know why. Our initial thoughts centered on the idea that the plunge in the stock market in the first six weeks of the year hit business confidence and triggered a pause in hiring decisions, later reflected in the payroll numbers.
Here's the bottom line: U.S. businesses appear to have over-reacted to the impact of the trade war in their responses to most surveys, pointing to a serious downturn in economic growth which has not materialized.
Trade talks between the U.S. and China officially resumed this week, with the first face-to-face meeting of the main negotiators taking place yesterday in Shanghai.
The BoJ yesterday kept the policy balance rate at -0.1%, and the 10-year yield target at "around zero", in line with the consensus.
Along with just about every other commentator and market participant, we have been wondering in recent months how longer Treasuries would react to the Fed starting to raise rates at the same time the ECB and BoJ are pumping new money into their economies via QE.
None of today's four monthly economic reports will tell us much new about the outlook, and one of them--ADP employment--will tell us more about the past, but that won't stop markets obsessing over it. We have set out the problems with the ADP number in numerous previous Monitors, but, briefly, the key point is that it is generated from regression models which are heavily influenced by the previous month's official payroll numbers and other lagging data like industrial production, personal incomes, retail and trade sales, and even GDP growth. It is not based solely on the employment data taken from companies which use ADP for payroll processing, and it tends to lag the official numbers.
The pace of layoffs might be picking up. Our first chart looks pretty convincing, but it's much too soon to know for sure. The claims data from mid-December through late January are subject to serious seasonal adjustment problems, partly because Christmas falls on a different day of the week each year and partly because the exact timing of post-holiday layoffs varies from year-to-year.
The monthly survey of small businesses conducted by the National Federation of Independent Business is quite sensitive to short-term movements in the stock market, so we're expecting an increase in the November reading, due today.
The year-long surge in CPI inflation in China will soon end.
While we were out, most of the action was on the political front, while the economic data mostly were unexciting.
China's GDP report for the fourth quarter, due on Friday, is likely to show that economic growth has stabilised, on the surface.
If the Phase One trade deal with China is completed, and is accompanied by a significant tariff roll-back, we'll revise up our growth forecasts, but we'll probably lower our near-term inflation forecasts, assuming that the tariff reductions are focused on consumer goods.
Normal service appears to have resumed in August, with payrolls rising by 201K, very close to the 196K average over the previous year.
Our forecast of a solid 190K increase in headline December payrolls ignores our composite employment indicator, which usually leads by about three months and points to a print of just 50K or so.
Hong Kong delivered a resounding landslide victory to pro-Democracy parties in district council elections over the weekend.
Today's headline durable goods orders number for January is likely to blast through the consensus forecast, +2.7%. We expect a 6.5% jump, comfortably reversing December's 5.0% drop.
Yesterday's State Council meeting significantly expanded support to the economy, through a number of channels.
Today brings an array of economic data, including the jobless claims report, brought forward because July 4 falls on Thursday.
Our payroll model relies heavily on lagged indicators of the pace of hiring, most of which have improved in recent months after a sustained, though modest, softening which began last spring. That's why we expected an above-consensus reading from ADP on Wednesday and from the BLS today.
The number of coronavirus cases continues to increase, but we're expecting to see signs that the number of new cases is peaking within the next two to three weeks.
The official PMIs suggest that the January survey data have escaped the worst of the hit from the virus.
Something of a debate appears to be underway in markets over the "correct" way to look at the coronavirus data.
Speeches by Chair Yellen and Vice-Chair Fischer give the two most important Fed officials the perfect platform today to signal to markets whether rates will rise this month.
We're fully expecting to see a hit to September payrolls from Hurricane Florence, which struck during the employment survey week.
The July trade deficit likely fell significantly further than the consensus forecast for a dip to $42.2B from $43.8B in June, despite the sharp drop in the ISM manufacturing export orders index. Our optimism is not just wishful thinking on our p art; our forecast is based on the BEA's new advance trade report. These data passed unnoticed in the markets and the media. The July report, released August 28, wasn't even listed on Bloomberg's U.S. calendar, which does manage to find space for such useless indicators as the Challenger job cut survey and Kansas City Fed manufacturing index. Baffling.
ADP's report that September private payrolls rose by 135K was slightly better than we expected, but not by enough to change our 150K forecast for tomorrow's official report.
The Fed left rates on hold yesterday, as expected, repeating its long-held core view that inflation will rise to 2% in the medium-term, requiring gradual increases in the fed funds rate.
The Fed likely will do nothing today, both in terms of interest rates and substantive changes to the statement. We'd be very surprised to hear anything new on the Fed's plans for its balance sheet.
The Redbook chainstore sales survey today is likely to give the superficial impression that the peak holiday shopping season got off to a robust start last week.
Korean trade ended the year strongly, salvaging what was shaping up as a dull fourth quarter for the economy.
As the situation with the coronavirus develops, and we gain more information on the authorities' response, it's becoming clear that the damage to Q1 GDP is going to be nasty.
The BoK surprised markets and commentators by keeping rates unchanged at 1.25% yesterday, rather than cutting to 1.0%.
We look for a 210K increase in July payrolls. That would be consistent with the message from an array of private sector surveys, as well as the recent trend.
On Friday last week, the Chinese authorities suspended sales of domestic and international tours, in an effort to contain the spread of the coronavirus, which started in Wuhan.
China's abysmal industrial profits data for October underscore why the chances of less- timid monetary easing are rising rapidly.
Japan's retail sales data--due out on Thursday-- have been badly affected by the October tax hike.
Monetary policy usually is the first line of defence whenever a recession hits.
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.
Our analysis of the Q3 activity and GDP data in yesterday's Monitor strongly suggests that China's authorities will soon ready further stimulus.
The extent of shut downs within China is now reaching extreme levels, going far beyond services and threatening demand for commodities, as well as posing a severe risk to the nascent upturn in the tech cycle.
China's official real GDP growth slowed to 6.0% year-over-year in Q3, from 6.2% in Q2 and 6.4% in Q1. Consecutive 0.2 percentage points declines are significant in China.
In one line: Surging employment index means payroll weakness likely will be temporary
The final Eurozone PMIs indicate that the cyclical recovery continued in Q1, but downside risks are rising. The composite index rose marginally to 53.0 in March, from 53.1 in February, below the initial estimate 53.7. Over the quarter as a whole, though, the index fell to 53.2 from 54.1 in Q4, indicating that economic momentum moderated in the first quarter.
At the headline level, much of the recent U.S. macro dataflow has been disappointing. January retail sales, industrial production, housing starts, and both ISM surveys--manufacturing and non-manufacturing-- undershot consensus, following a sharp and unexpected drop in December durable goods orders.
Chief U.S. Economist Ian Shepherdson on the latest ISM Non-Manufacturing data release
China's official PMIs were little changed in August, with the manufacturing gauge up trivially to 51.3, from 51.2 in July and the non-manufacturing gauge up to 54.2, from 54.0.
All the fundamentals point to a very strong payroll number for May. The NFIB hiring in tentions index, the best single leading indicator of payrolls five months ahead, signalled back in December that May employment would rise by about 300K. The NFIB actual net hiring number, released yesterday, is a bit less bullish, implying 250K, but the extraordinarily low level of jobless claims, shown in our first chart, points to 300K. Finally, the ISM non-manufacturing employment index suggests we should be looking for payrolls to rise by about 260K. Our estimate is 280K.
In one line: Surging core capex orders suggest non-manufacturing firms are spending.
China's PMIs are not yet fully picking up the coronavirus; China's non-manufacturing PMI lifted by local government spending; not yet hit by the virus; Japan's job postings still suggest the unemployment rate is unsustainably low; Japan's national inflation has less far to fall than Tokyo's; The coronavirus will delay the return of Japanese retail sales to pre-tax hike levels; Investment goods drive Japan's IP rebound in December; no real support now for consumer goods production; December probably is as good as it will get for Korean industrial production, for now
Chief U.S. Economist Ian Shepherdson on ISM Non-Manufacturing
Payroll growth rebounded to 223K in May, after two sub-200K readings, and we're expecting today's June ADP report to signal that labor demand remains strong.
pantheon macroeconomics, pantheon, macroeconomic, macroeconomics, independent analysis, independent macroeconomic research, independent, analysis, research, economic intelligence, economy, economic, economics, economists, , Ian Shepherdson, financial market, macro research, independent macro research