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447 matches for " unemployment rate":
Korea's unemployment rate was unchanged in April, at 3.8%, beating even our below-consensus forecast for only a minor uptick, to 3.9%.
Korea's unemployment rate rose faster than expected in May, jumping to 4.5%, from 3.8% in April. We've been arguing for some time that the delayed impact of the economic growth slowdown from late- 2017 to early-2019 would eventually push the jobless rate to the mid-4% level this year; the sudden stop caused by Covid-19 merely sped up this process.
The Japanese unemployment rate fell again in September, to 2.3% from 2.4%. In the same vein, the job-to-applicant ratio rose to 1.64, from 1.63.
In one line: The labour market will deteriorate soon.
In one line: A collapsing participation rate prevents a sharper deterioration in unemployment.
In one line: An expected rebound in the jobless rate, despite plunging participation
In one line: The improvement continues.
In one line: A modest deterioration of the labour market but the real pain is around the corner.
In one line: The slow recovery of the Brazilian labor market continues.
In one line: A solid end to 2019 for Brazil's labour market.
In one line: The gradual recovery of the labour market continues.
In one line: Improvement continued through February, but the labour market will deteriorate soon.
In one line: A substantial improvement, but not in line with fundamentals.
In one line: The labor market is gradually deteriorating.
In one line: A substantial improvement, but it's temporary; a sharp jump is looming.
The unemployment rate hit its post-1970 low in April 2000, at the peak of the first internet boom, when it nudged down to just 3.8%. The low in the next cycle, first reached in October 2006, was rather higher, at 4.4%.
Data on Friday showed that the downward trend in Brazil's unemployment continued into this year. The unadjusted unemployment rate fell to 11.2% in January, slightly below the consensus, and down from 12.0% in January last year.
Focus on Japan's job-to-applicant ratio, not the unemployment rate
It's a myth that the 10-ye ar decline in the unemployment rate has not driven up the pace of wage growth.
Japan's unemployment rate has been remarkably steady over the past few months.
Data to be released this Friday should show that Japan's labour market remains tight, though the unemployment rate likely ticked back up in February, to 2.6%, after the erratic drop to 2.4% in January.
Japan's unemployment rate merely edged up to 2.5% in March, from February's 2.4% rate. It probably will end the year around one percentage point higher, though, with the pain extending through the second half.
The tiny headline consensus beat in the August payrolls numbers is nothing to get excited about, and neither is the unexpected drop in the headline unemployment rate.
Yesterday's October labour market data in Mexico showed that the adjusted unemployment rate rose a bit to 3.4%, from 3.3% in September.
Today's labour market data look set to show that the headline, three-month average, unemployment rate held steady at just 5% in May, unchanged from April's reading.
It's very tempting to look at the upturn in the participation rate in recent months and extrapolate it into a sustained upward trend. If the trend were to rise quickly enough, it conceivably could prevent any further fall in the unemployment rate, preventing it falling below the bottom of the Fed's estimated Nairu range.
Chile's unadjusted unemployment rate fell to 7.1% in July-to-September, from 7.3% in June-to-August, but it was up from 6.7% in September last year.
The falling unemployment rate and the threat it poses to the inflation outlook mean that the labor market numbers in the NFIB small business survey attract more attention than the other data in the report.
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.
Yesterday's labour market data gave sterling a shot in the arm on t wo counts. First, the headline, three-month average, unemployment rate fell to just 4.5% in May, from 4.6% in April.
Korea's unemployment rate tumbled to 3.7% in February, after the leap to 4.4% in January.
In principle, predicting the interest rate policies of an inflation-targeting central bank should be simple. Our first chart shows a standard Taylor Rule rate for the Eurozone based on the ECB's inflation target of 2%, the long-run average unemployment rate and a long run "equilibrium interest rate" of 1.5%. This framework historically has been a decent guide to ECB policy.
Korea's unemployment rate plunged unexpectedly in August, to 3.2%--the lowest in a year--from 4.2% in July, defying expectations for no change and the renewed pressure on the economy from the second wave of Covid-19.
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.
The labour market in Germany tightened further at the end of last year. The headline unemployment rate--unemployment claims as a share of the labour force--fell to 5.5% in December, from 5.6% in November, driven by a 29K plunge in claims.
At their March meeting FOMC members' range of forecasts for the unemployment rate in the fourth quarter of this year ranged from 4.4% to 4.7%, with a median of 4.5%. But Friday's report showed that the unemployment rate hit the bottom of the forecast range in April.
A cursory glance at July's labour market report gives no cause for alarm. The headline, three-month average, unemployment rate returned to 3.8% in July, after edging up to 3.9% in June.
Yesterday's labour market data significantly bolster the consensus view on the MPC that interest rates do not need to rise this year to counter the imminent burst of inflation. Granted, the headline, three-month average, unemployment rate fell to 4.7% in January--its lowest rate since August 1975--from 4.8% in December, defying the consensus forecast for no-change.
The Monetary Policy Committee continues to assert that it can leave interest rates at rock-bottom levels, even though the unemployment rate has returned to its pre-recession level, because it understates the extent of slack in the labour market. If that hypothesis were correct, however, the relationship between the unemployment rate and wage growth would have weakened. But this clearly has not happened, as our first chart shows.
The end of the government shutdown--for three weeks, at least-- means that the data backlog will start to clear this week.
Industrial profits growth is closely watched by the Chinese authorities, even more so now that deleveraging is a prime policy aim.
All the evidence indicates that growth in Mexican consumers' spending is slowing, despite the better- than-expected November retail sales numbers, released yesterday.
Yesterday's sole economic report in the EZ showed that consumer sentiment in Germany improved mid-way through the fourth quarter.
Since the Party Congress last month, China has made a number of bold moves in multiple policy fields, with a regularity that almost implies the authorities are working through a list.
The BRL remains under severe stress, despite renewed signals of a sustained economic recovery and strengthening expectations that the end of the monetary easing cycle is near.
Japan's all-industry activity index dropped by 3.8% month-on-month in March, worse than the 0.7% slip in February.
Whichever way you choose to slice the numbers, consumers' spending is growing much more slowly than is implied by an array of confidence surveys.
We have argued for some time that the revival in nonoil capex represents clear upside risk for GDP growth next year, but it's now time to make this our base case.
Japan's flash Nikkei manufacturing PMI report for November was abysmal, putting the chances of a recovery this quarter into serious doubt.
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.
Retail sales in Mexico fell in Q4, but we think households' spending will continue to contribute to GDP growth in the first quarter, at the margin.
The BoK surprised markets and commentators by keeping rates unchanged at 1.25% yesterday, rather than cutting to 1.0%.
We were happy to see upside surprises from both sides of the domestic economy yesterday, but we doubt that the August readings from both the Conference Board's consumer confidence survey and the Richmond Fed business survey can hold.
Yesterday's IFO data reversed the good vibes sent by last week's upbeat German PMIs.
Recent polls in Argentina suggest that Alberto Fernández, from the opposition platform Frente de Todos, has comfortably beaten Mauricio Macri, to become Argentina's president.
Today's payroll number is completely irrelevant, because 97% of the 10.2M increase--so far--in initial jobless claims from their pre-coronavirus level came after the employment survey was conducted, between Sunday March 8 and Saturday March 14.
Economic data released on Friday underscored our view that bolder rate cuts in Brazil are looming. The BCB's latest BCB's inflation report, released on Thursday, showed that policymakers now see conditions in place to increase the pace of easing "moderately" .
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.
The limited data available on the state of the labour market, since the government forced businesses to close two weeks ago, paint a disconcerting picture.
Market-based measures of uncertainty and volatility remain elevated, but if we look beyond the headlines, two overall assumptions still inform forecasters' analysis of the economy and Covid-19.
Monetary policy usually is the first line of defence whenever a recession hits.
While we were out, data released in Mexico added to our downbeat view of the economy in the near term, supporting our base case for interest rate cuts in the near future.
Data released last week confirm that Brazil's recovery has continued over the second half of the year, supported by steady household consumption and rebounding capex.
Chile's stronger-than-expected industrial production report for December, and less-ugly-than- feared retail sales numbers, confirmed that the hit from the Q4 social unrest on economic activity is disappearing.
Last week's national accounts confirmed that the economy lost momentum abruptly in Q1, with net trade and investment failing to offset weaker growth in households' spending.
Japan's Q2 Tankan survey wasn't all bad news, but the positives won't last long. The large manufacturers index dropped to 7 in Q2, after the decline to 12 in Q1.
China's Caixin manufacturing PMI doused hopes of turning over a January new leaf; it dropped to 49.7 in November, from 50.2 in December.
The data in LatAm were all over the map while we were out.
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 absence of hawkish undertones in the minutes of the MPC's meeting or in the Inflation Report forecasts took markets by surprise yesterday. The dominant view on the Committee remains that the economy will slow over the next couple of years, preventing wage growth from reaching a pace which would put inflation on trac k permanently to exceed the 2% target.
Our analysis of the Q3 activity and GDP data in yesterday's Monitor strongly suggests that China's authorities will soon ready further stimulus.
Yesterday's EZ money supply data confirmed that liquidity conditions in the private sector improved in Q3, despite the dip in the headline.
Survey data in Germany showed few signs of picking up from their depressed level at the start of Q4.
Our forecast that CPI inflation will shoot up to about 3% in the second half of 2017, from 0.6% last month, assumes that pass-through from the exchange rate to consumer goods prices will be as swift and complete as in the past. Our first chart shows that this relationship has held firm recently, with core goods prices falling at the rate implied by sterling's appreciation in 2014 and 2015.
The definition of "yesbutism": Noun, meaning the practice of dismissing or seeking to diminish the importance of data on the grounds that the next iteration will tell the opposite story.
The coronavirus pandemic looks set to spread rapidly throughout LatAm.
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.
The latest E.C. survey shows the gap between firms' and households' confidence levels has remained substantial.
French consumers remained in great spirits midway through the fourth quarter. The headline INSEE consumer confidence index jumped to a 28-month high in November, from 104 in October, extending its v-shaped recovery from last year's plunge on the back of the yellow vest protests.
Inflation in Mexico remains relatively sticky, limiting Banxico's capacity to adopt a more dovish approach, despite the subpar economic recovery.
Concern over individual freedoms was the spark for Hong Kong's recent demonstrations and troubles, and protesters' demands continue to be political in nature.
Data released this week have confirmed that the Mexican economy is struggling and that the near-term outlook remains extremely challenging.
It doesn'tt matter if third quarter GDP growth is revised up a couple of tenths in today's third estimate of the data, in line with the consensus forecast.
Yesterday's data don't significantly change our view that first quarter GDP growth will be reported at only about 1%, but the foreign trade and consumer confidence numbers support our contention that the underlying trend in growth is rather stronger than that.
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.
Brazil's external accounts were a relatively bright spot again last year.
Our ECB-story since Ms. Lagarde took the helm as president has been that the central bank will do as little as possible through 2020, at least in terms of shifting its major policy tools.
Mexican policymakers voted to leave the main rate on hold at 8.25% yesterday, as inflation remains high--though falling--and the economy is stuttering.
It looks as though business and consumer confidence in Korea has brushed off the economic threat of the second Covid-19 wave.
The public finances are in better health than appeared to be the case a few months ago.
Brazilian inflation is off to a bad start this year, but January's jump is not the start of an uptrend, and we think good news is coming.
It is fair to say that the strength of the rebound in the housing market over the summer has caught most analysts, including ourselves, by surprise.
The gap between U.K. and U.S. government bond yields has continued to grow this year and is approaching a record.
The big talking point over the weekend was the report from Germany's Robert Koch Institute, RKI, that the Covid-19 reproductive rate jumped to 2.88 at the end of last week, driving the seven-day average up to 2.07.
One of the arguments we hear in favor of an endless Fed pause--in other words, the cyclical tightening is over--is that GDP growth is set to slow markedly this year, to only 2% or so.
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.
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.
In Brazil, last week's formal payroll employment report for March was decent, with employment increasing by 56K, well above the consensus expectation for a 48K gain.
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.
Mexico's retail sector is finally improving, following a grim second half last year.
We expect the Mexican economy to continue growing close to 2% year-over-year in 2019, driven mainly by consumption, but constrained by weak investment, due to prolonged uncertainty related to trade.
Further evidence that the general election has transformed business confidence emerged yesterday, in the form of January's CBI Industrial Trends survey.
Brazil's monetary policy committee, the Copom, cut the Selic rate by 25bp to 14.0% in a unanimous decision, without bias, on Wednesday. This marks the start of the first easing cycle since 2012, and it arrives after 15 months with rates held at 14.25%.
Expectations for a March rate hike have dipped since Fed Vice-Chair Clarida's CNBC interview last Friday.
The FOMC kept policy unchanged at April's meeting-- rates stayed at zero, and all the market valves are wide open, as needed--but policymakers spent considerable time pondering what might happen over the next few months, and how policy could evolve.
February's consumer price figures give the MPC reason to doubt the case for raising interest rates again as soon as May.
High interest rates and inflation, coupled with increasing uncertainty, put Mexican consumption under strain last year.
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 White House budget proposals, which Roll Call says will be released in limited form on March 14, will include forecasts of sustained real GDP growth in a 3-to-3.5% range, according to an array of recent press reports.
The coronavirus pandemic is wreaking havoc in Brazil.
On a trade-weighted basis, sterling has dropped by only 1.5% since the start of the month, but it is easy to envisage circumstances in which it would fall significantly further.
The Prime Minister has revealed that her Plan B for Brexit is to get Eurosceptics within the Tory party on side in an attempt to show the E.U. that a deal could be done if the backstop for Northern Ireland was amended. Her plan is highly likely to fail, again.
Brazil's inflation rate remained well under control over the first half of February.
Broadly speaking, yesterday's headline EZ survey data recounted the same story they've told all year; namely that manufacturing is suffering amid resilience in services.
It would be astonishing if the Fed doesn't raise rates today, and Chair Powell is not in the astonishment business; they will hike by 25bp.
Data released over the last few weeks have confirmed that Colombia's economic performance in Q2 was grim, adding weight to our below-consensus GDP forecast.
Markets will be hyper-sensitive to U.K. data releases following the MPC's warning that it is on the verge of raising interest rates.
Economic news in the Eurozone, and virtually everywhere else, has been mostly downbeat in the past few months, but French consumers are doing great.
The November IFO report suggests that the headline indices are on track for a tepid recovery in Q4 as a whole, but the central message is still one of downside risks to growth
Yesterday's State Council meeting significantly expanded support to the economy, through a number of channels.
The dovish members of Banxico's board garnered further support on Friday for prolonging the current easing monetary cycle over coming meetings.
Japanese services price inflation edged down in May as the twin upside drivers of commodity price inflation and yen weakness began to lose steam. We expect wage costs to begin edging up in the second half but this will provide only a partial counterbalance.
Data released on Friday in Brazil and recent political events helped to open the door further to a final rate cut in August. The IPCA-15--which previews the full CPI-- rose 0.3% month-to-month in July, well below market expectations, 0.5%.
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.
Friday's PMI data were a mixed bag.
Mexico's final estimate of third quarter GDP, released yesterday, confirmed that the economy is still struggling in the face of domestic and external headwinds.
Meetings are a nice way to stress test our base case stories and gauge what questions are important for clients.
The mortgage market is continuing to hold up surprisingly well, given the calamitous political backdrop.
The PMIs in the Eurozone are still warning that the economy is in much worse shape than implied by remarkably stable GDP growth so far this year.
Inflation in the biggest economies in the region remains close to cyclical lows, allowing central banks to ease even further over the next few months.
We are fundamentally quite bullish on the housing market, given the 100bp drop in mortgage rates over the past six months and the continued strength of the labor market, but today's May new home sales report likely will be unexciting.
We doubt that the new Job Support Scheme, announced by the Chancellor yesterday, will hold back the tide of redundancies over the coming months.
Data released yesterday confirmed that Mexico's economy ended Q4 poorly, confounding the most hawkish Banxico Board members.
Looking beyond the potential hit from the lockdown in North Rhine-Westphalia, German consumer sentiment is improving steadily.
Politics in Brazil has been busy in recent days, with local media reporting several items of interest.
This was supposed to be the year that wage growth finally would pick up and signal clearly to the MPC that the economy needs higher interest rates.
In our Webinar--see here--we laid out scenarios for Chinese GDP in Q1 and for this year.
The speculation is over: 3.283 million people filed a new claim for unemployment benefits last week, nearly double the 1.7M consensus forecast, which looked much too low.
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.
The MPC's view that the economy likely will grow at an above-trend rate over the coming quarters was challenged immediately last week by the PMIs.
October payrolls were stronger than we expected, rising 128K, despite a 46K hit from the GM strike.
We are not worried, at all, by the slowdown in headline payroll growth to 157K in July from an upwardly-revised 248K in June.
We had hoped that the statistical problems which have plagued the initial estimates of August payrolls in recent years had faded, but Friday's report suggests our judgement was premature.
Labor demand, as measured by an array of business surveys, clearly slowed from the cycle peak, recorded late last year.
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.
Productivity likely rose by 1.7% last year, the best performance since 2010.
Emerging evidence suggests that the economy has passed the period of peak Covid-19 pain.
It would be astonishing if the May and June payroll numbers looked much like April's strong data, at least in the private sector.
In today's Monitor, we'll let the economy be, and focus instead on what are fast becoming the two defining political issues for the EU and its new Commission, namely migration and climate change.
Chile's Imacec index confirmed that economic growth ended the year on a soft note, due mainly to weakness in the mining sector.
Korea's manufacturing PMI fell for a fourth straight month in April, dropping to 41.6, which is the lowest reading since January 2009.
We're very comfortable with the idea that the coronavirus is a broad deflationary shock to the U.S. economy.
In the wake of yesterday's ADP report, which showed private payrolls up 250K in December, we have revised our forecast for today's official headline number up to 240K from 210K.
We've previously highlighted the pro-cyclical elements of the BoJ's framework, but it's worth repeating, when an economic shock comes along.
Our composite index of employment indicators, based on survey data and the official JOLTS report, looks ahead about three months.
The economy will endure a sluggish recovery from Covid-19 this year, even if a second wave of the virus is avoided, partly because monetary stimulus is not filtering through powerfully to households.
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.
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 recent March economic activity reports for Chile have been terrible, showing the first signs of the Covid-19 shock, and worse is to come.
If the underlying trend in payroll growth is about 200K, then a weather-depressed 98K reading needs to be followed by a rebound of about 300K in order fully to reverse the hit. But the consensus for today's April number is only 190K, and our forecast is 225K.
It will take a while for the economic data in the euro area fully to reflect the Covid-19 shock, but the incoming numbers paint an increasingly clear picture of an improving economy going into the outbreak.
We set out the reasoning behind the big upward revision to our payroll forecast yesterday, in the wake of the much better-than-expected ADP report.
We're nudging up our forecast for today's August payroll number to 180K, in the wake of the ADP report.
The final Monitor before our summer break is characterized by great uncertainty.
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.
In Friday's Monitor we analysed the draft Japanese budget, as reported by Bloomberg. We suggested that the GDP bang-for-government-expenditure- buck is likely to be less than that implied by the authorities' forecasts.
Our below-consensus 125K forecast for today's February payroll number is predicated on two ideas.
A casual glance at our char t below, which shows the number of job openings from the JOLTS report, seems to fit our story that the slowdown in payrolls in April and May--perhaps triggered by the drop in stocks in January and February--will prove temporary. Job openings dipped, but have recovered and now stand very close to their cycle high.
The single most surprising U.S. economic report ever published likely is explained very simply: We know a great deal about the numbers of people losing jobs, but not much about people finding jobs.
The reported drop in mortgage applications over the holidays is now reversing, not that it ever mattered.
China's official manufacturing PMI slipped in June, but the overall picture for Q2 is sound despite the uncertainty posed by rising trade tensions with the U.S.
The dip in payroll growth in September was due to Hurricane Florence. We expect a clear rebound in payrolls in October; our tentative forecast is 250K.
We expect August's GDP figures, released on Wednesday, to show that month-to-month growth slowed to 0.1%, from 0.3% in July.
We'd be quite surprised if the headline payroll number today turned out to be far from the consensus, 205K, or our forecast, 225K.
The coronavirus outbreak has pushed inflation lower in the Andean economies as the shock drives them into the deepest recession on record.
The stock of bank lending to businesses is on course to fall in June, after a modest increase in May and huge jumps in March and April.
We expect to see a 180K increase in November payrolls
We raised our forecast for today's January payroll number after the ADP report, to 200K from 160K.
We're sticking to our 220K forecast for today's official payroll number, despite the slightly smaller-than- expected 179K increase in the ADP measure of private employment.
...The Fed did nothing, surprising no-one; the labor market tightened further; the housing market tracked sideways; survey data mostly slipped a bit; and oil prices jumped nearly $4, briefly nudging above $50 for the first time since May.
The Brazilian Central Bank's policy board-- COPOM--met expectations on Wednesday, voting unanimously to cut the Selic rate by 25bp to 2.00%.
Chile's near-term economic outlook is still negative, but clouds have been gradually dispersing since late Q4, due mostly to better news on the global trade front, China's improving economic prospects, and rising copper prices.
Japan's average year-over-year wage growth slowed sharply in May, but this mainly was a correction of the April spike.
The NFIB survey of small businesses today will show that July hiring intentions jumped by four points to +19, the highest level since November 2006. The NFIB survey has been running since 1973, and the hiring intentions index has never been sustained above 20.
The flow of data pointing to strength in the labor market has continued this week, on the heels of last week's report of a 250K jump in October payrolls.
No single measure of labor demand is always a reliable leading indicator of the official payroll numbers, which is why we track an array of private and official measures.
In the wake of Wednesday's ADP report, showing a mere 27K increase in private payrolls, we cut our payroll forecast to 100K.
Data released this week in Brazil underscored that the Covid-related shock on the industrial sector is finally easing, as the economy gradually reopens.
Activity data from Colombia over the past quarter have been strong. Real GDP expanded by a relatively robust 2.8% year-over-year in Q2, and is on track to post a 3.2% increase in Q3.
Japanese retail sales were unchanged in October month-on-month, after a 0.8% rise in September.
We have witnessed a dramatic shift in just a few weeks in perceptions of Mexico as an investment destination.
The trade war with China is not big enough or bad enough alone to push the U.S. economy into recession.
Markets expect the Fed will fail to follow through on its current intention to raise rates twice more this year and three times next year. Part of this skepticism reflects recent experience.
We have argued recently that the year-over-year rates of core CPI and core PCE inflation could cross over the next year, with core PCE rising more quickly for the first time since 2010.
Markets see a strong possibility, though not a probability, that the BoJ will cut rates on Thursday.
As we write, markets see a 70% chance that the MPC will cut Bank Rate on January 30.
The Bank of Korea's two main monthly economic surveys were very perky in January.
Data yesterday showed that German inflation roared higher at the start of the year, but the devil is in the detail.
Economic data released last week underscored that Brazil's economic recovery is continuing; the effect of recent bold rate cuts and improving domestic fundamentals will further support the gradual recovery of the labour market.
French consumer confidence and consumption have been among the main bright spots in the euro area economy so far this year.
Economic data in Mexico continue to come in strong.
Chancellor Javid told the Financial Times earlier this month that he wants to lift the rate of GDP growth to between 2.7% and 2.8%, the average rate in the 50 years following the Second World War.
Yesterday's final manufacturing PMIs confirmed that all remained calm in the EZ industrial sector through February.
Chile's near-term economic outlook is still negative after a sharp resurgence of coronavirus cases.
Gilts continued to rally last week, with 10-year yields dropping to their lowest since October 2016, and the gap between two-year and 10-year yields narrowing to the smallest margin since September 2008.
This week's economic reports have provided clear, and uplifting, evidence that EZ consumers came out swinging as lockdowns were lifted.
Inflation and growth paths remain diverse across LatAm, but in the Andes, the broad picture is one of modest inflationary pressures and gradual economic recovery.
Markets were surprised yesterday by the absence of hawkish comments or guidance accompanying the MPC's decision to raise interest rates to 0.50%, from 0.25%.
Yesterday's economic reports in the euro area were mixed.
Japan is one of the countries most exposed to economic damage from the coronavirus.
We're expecting a hefty increase in private payrolls in today's August ADP employment report. ADP's number is generated by a model which incorporates macroeconomic statistics and lagged official payroll data, as well as information collected from firms which use ADP's payroll processing services.
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.
Yesterday's first estimate of full-year 2019 GDP in Mexico confirmed that growth was extremely poor, due to domestic and external shocks.
The jobless rate fell back to 2.8% in June after the surprise rise to 3.1% in May. This drop takes us back to where we were in April before voluntary unemployment jumped in May.
Japan's jobless rate inched up to 2.5% in January, from 2.4% in December.
Markets were left somewhat disappointed yesterday by the G7 statement that central banks and finance ministers stand ready "to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks."
The ECB will leave its key refinancing and deposit rates unchanged today, at 0.00% and 0.5%, respectively, but we are confident that the central bank will expand its existing stimulus efforts via a boost and extension of the Pandemic Emergency Purchase Program.
The unexpectedly small 2,760K drop in the ADP measure of May private payrolls is consistent, at least, with the idea that the partial reopening of several states in the early part of the month prompted an immediate wave of rehiring.
April payroll growth likely will be reported at close to 200K. Overall, the survey evidence points to a stronger performance, but they don't take account of weather effects, and April was a bit colder and snowier than usual. We're not expecting a big weather hit, but some impact seems a reasonable bet.
LatAm data in recent days have confirmed that efforts to contain the coronavirus, plunging global trade, and the collapse in oil prices, are dealing a severe economic and financial blow.
Two approaches to forecasting payrolls have been the most useful in recent months, and both point to August payrolls rising by less than the 1,350K consensus; our forecast is 750K.
We look for a 150K increase in September payrolls, rather better than the August 130K headline number, which was flattered by a 28K increase in federal government jobs, likely due to hiring for the 2020 Census.
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.
The downturn in global trade looks set to turn a corner, at least judging by the outlook for Korean exports, which are a key bellwether.
The May employment report was somewhat overshadowed by the furor over the president's tweet, at 7.15AM, hinting--more than hinting--that the numbers would be good.
Today's ADP employment report for December ought to show private payrolls continue to rise at a very solid pace
Today's October ADP measure of private payrolls likely will overshoot Friday's official number.
Yesterday's data kicked off the release of Eurozone Q3 growth numbers with a robust Spanish headline. Real GDP in Spain rose 0.8% quarter-on-quarter, slowing slightly from 0.9% in Q2, and le aving the year-over-year rate unchanged at 3.1%.
The virus outbreak has been relatively limited so far in Argentina, with 820 confirmed cases, but the numbers are rising rapidly.
We remain concerned that huge job losses are imminent, slowing the economic recovery after a mid-summer spurt.
Data released in recent days confirmed the intensity of the Covid-related shock to the Chilean economy in Q2.
The continued gradual rise in new confirmed cases of Covid-19 lends more weight to the idea that the economy already has reopened as much as possible while containing the virus.
The Caixin manufacturing PMI for January was grim, indicating that China's start to the year wasn't as benign as the official surveys suggested.
The fundamentals underpinning our forecast of solid first half growth in consumers' spending remain robust.
It's not our job to pontificate on the merits, or otherwise, of the tax cut bill from a political perspective.
Data released yesterday confirm that Brazil's recovery has continued over the second half of the year, supported by steady capex growth and rebounding household consumption.
The end of Korea's first Covid-19 wave, coupled with the government's economic support measures, has been a boon for the retail industry.
One of the key positive signs in the Eurozone data since the virus hit has been the evidence that households' liquid money balances have been well supported by job retention schemes, extended unemployment insurance, and aggressive monetary stimulus.
We continue to take little comfort from the small decline in the Labour Force Survey measure of employment in the first half of this year.
The MPC likely will steer clear of providing strong signals on the outlook for monetary policy at next week's meeting.
Today's JOLTS survey covers August, which seems like a long time ago. But the report is worth your attention nonetheless.
China concludes its annual Central Economic Work Conference today, where the economic targets and the agenda for next year are set.
Mexico's economy is not accelerating, but it is holding up very well in difficult circumstances, with rising domestic political risk and stifling interest rates.
Mark Carney emphasised in his Mansion House speech last month that he wants wage growth to "begin to firm" from recent "anaemic" rates before voting to raise interest rates.
In previous Monitors--see here--we've suggested that, thanks to the coronavirus, China simply will lose some of the spending that would have gone on during the holiday this year.
The sudden jump in the headline, three-month average, growth rate of average weekly wages to a 10-year high of 3.3% in October, from just 2.4% four months earlier, might indicate that the U.K. has reached the sharply upward-sloping part of the Phillips Curve.
China's October foreign trade headlines beat expectations, but the year-over-year numbers remain grim, with imports falling 6.4%, only a modest improvement from the 8.5% tumble in September.
Fed Chair Yellen said something which sounded odd, at first, in her Q&A at the Senate Banking Committee last Tuesday. It is "not clear" she argued, that the rate of growth of wages has a "direct impact on inflation".
Momentum in French manufacturing eased slightly in November, but the setback was modest. Industrial production dipped 0.5% month-to-month, only partially reversing the revised 1.7% jump in October.
The clear threat to demand posed by the coronavirus and China's efforts at containment have sent a shock wave through commodities markets.
First things first: Payroll growth likely will be sustained at or close to November's pace.
China's trade surplus has been trending down in the last two years.
Many investors probably will be scratching their heads in the wake of next week's labour market report, which will reveal the Covid-19 hit to employment and wages in April, as well as showing how much further the claimant count soared in May.
The MPC's pause for breath last week disappointed a majority of investors, who thought that it would at least tweak aspects of the support programmes put in place in March.
Collapsing oil prices add fresh deflationary pressure on China.
Chair Yellen has become quite good at not giving much away at her semi-annual Monetary Policy Testimony.
The case for continuing to increase Bank Rate gradually--recently reiterated by MPC members Andy Haldane and Michael Saunders-- strengthened yesterday with the release of April's labour market report, which revealed renewed momentum in wage growth.
China's GDP report for the fourth quarter, due on Friday, is likely to show that economic growth has stabilised, on the surface.
Jim Bullard, the St. Louis Fed president, said last week that Phillips Curve effects in the U.S. are "weak", and that nominal wage growth is not a good predictor of future inflation.
Japan's money and credit data have shown signs of life in recent months, but that's all set to change quickly, due to the disruptions caused by the outbreak of the coronavirus.
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.
Chair Yellen broke no new ground in her Testimony yesterday, repeating her long-standing view that the tightening labor market requires the Fed to continue normalizing policy at a gradual pace.
Analysis of the economy's potential to recover later this year from extreme weakness in Q2 has focussed largely on the extent to which virus-related restrictions will be lifted.
With rates now certain to rise this week, the real importance of the employment picture is what it says about the timing of the next hike. To be clear, we think the Fed will raise rates again in June, and will at that meeting add another dot to the plot, making four hikes this year.
The effects of Covid-19--both negative and positive--on Korea's labour market certainly were felt in February.
China's October activity data showed signs of the infrastructure stimulus machine sputtering into life. Consensus expectations appear to hold out for a continuation into November, but we think the numbers will be disappointing.
We've been consistent in saying that Japanese capex would roll over this year, after strength in the first three quarters was seen by the authorities and many commentators as a sign of resilience.
We have downgraded our 2019 and 2020 China GDP forecasts on previous occasions because monetary conditions have been surprisingly unresponsive to lower short-term rates.
India's shocking PMIs for April leave little doubt that the second quarter will be bad enough to result in a full-year contraction in 2020 GDP, even if economic activity recovers strongly in the second half.
China's money and credit data for February were reassuring, at least when compared with the doomsday scenario painted, so far, by other key indicators for last month.
Our forecast for a 0.3% increase in the September core PPI, slightly above the underlying trend, is even more tentative than usual.
Today's FOMC minutes will add flesh to the bones of the three dissents on September 21. The FOMC statement merely said that each of the three--Loretta Mester, Esther George and Eric Rosengren--preferred to raise rates by a quarter-point.
The U.K. economy underperformed its peers to an extraordinary degree in Q2.
Yesterday's labour market data showed that growth in households' income has slowed significantly in recent months. Firms are both hiring cautiously and restraining wage increases, due to heightened uncertainty about the economic outlook and rising raw material and non-wage labour costs. Consumers' spending, therefore, will support GDP growth to a far smaller extent this year than last.
China's November money and credit data were a little less grim, with only M2 growth slipping, due to unfavourable base effects.
Manufacturing in France remained on the front foot at the start of Q4.
The latest official data show that net migration to the U.K. hasn't fallen much, despite all the uncertainty created by the Brexit vote.
Data released in recent days have started to reveal a story of horror and misery in the Brazilian economy.
Japan's main activity data for April were massively disappointing, presaging the sharper GDP contraction we expect in Q2, compared with Q1.
The Brazilian Central Bank's policy board-- COPOM--voted unanimously on Wednesday to cut the Selic rate by 50bp to 5.00%, as expected.
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.
The worst of the pandemic seems to be over in many countries in LatAm, allowing a gradual reopening of their economies.
A firmer picture is emerging of how Japan's economy fared in Q3, in light of the latest slew of data for August.
The more headline hard data we see in the Eurozone, the more we are getting the impression that 2019 is the year of stabilisation, rather than a precursor to recession.
Data released yesterday showed that the labour market in Brazil looks relatively resilient to the collapse in economic activity.
Today brings a raft of data with the potential to move markets, but we're far from convinced that the two most closely-watched reports--ADP employment and the ISM manufacturing survey--will tell us much about the future.
Yesterday's March labour market data in Germany were surprisingly strong
China's official PMIs for March surprised well to the upside, cheering markets across Asia.
Data released this week in LatAm are the last calm before the coronavirus storm.
Chile's central bank left its policy rate on hold last Friday at 3.0%, in line with market expectations, amid easing inflationary pressures and a struggling economy.
Yesterday's first estimate of full-year 2016 GDP in Mexico indicates that growth gathered momentum over the second half of last year. But risks are now tilted to the downside, following the U.S. election. GDP rose 0.6% quarter-on-quarter in Q4, after a 1.0% increase in Q3. Growth was much slower in the firs t half, as shown in our char t below.
Recent economic weakness in Brazil, particularly in domestic demand, and the ongoing deterioration of confidence indicators, have strengthened the case for interest rate cuts.
We have few doubts that labor demand remained strong in January, but the chance of a repeat of December's 312K payroll gain is slim.
This week's labour market data likely will show that the Coronavirus Job Retention Scheme did not prevent a rising tide of redundancies in response to Covid-19.
Slowly but surely, it is becoming respectable to argue that central bank policy in the developed world is part of the problem of slow growth, not the solution. We have worried for some time that the signal sent by ZIRP--that the economy is in terrible shape--is more than offsetting the cash-flow gains to borrowers.
Neither the 33K drop in September payrolls nor the 0.5% jump in hourly earnings tells us anything about the underlying state of the labor market.
We're expecting a hefty increase in February payrolls today, but even a surprise weak number likely wouldn't prevent a rate hike next week. The trends in all the private sector employment surveys are strong and improving, and jobless claims have dropped to new lows too, though we think that's probably less important than it appears.
China's trade balance flipped to an unadjusted deficit of $7.1B in the first two months of the year, from a $47.2B surplus in December.
The data calendar is so congested next week that it makes sense to preview Tuesday's labour market report early.
Lacklustre economic data and persistent no deal Brexit risk mean that the MPC won't rock the boat at this week's meeting.
Inflation pressures in Brazil are now well- contained, with the headline rate falling to a decade low in July. We think inflation is now close to bottoming out, but the current benign rate strengthens our base case forecast for a 100bp rate cut at the next policy meeting, in September.
We expect June's GDP data, released on Wednesday, to show that the economic recovery gathered momentum in June, having got off to a faltering start in May.
Nowhere is the gap between sentiment and activity wider than in the NFIB survey of small businesses. The economic expectations component leaped by an astonishing 57 points between October and December, but the capex intentions index rose by only two points over the same period, and it has since slipped back. In February, the capex intentions index stood at 26, compared to an average of 27.3 in the three months to October.
Private consumption in Japan will take time to recover, even if some semblance of normality returns from this month.
This week's data have offered further clear hard evidence of the Covid-19 shock to the Mexican economy, supporting our base case of further interest rate cuts in the coming monetary policy meetings.
The softening in payroll growth in November appears mostly to be a story about short-term noise, rather than a sign that tariffs are hurting or that the broader economy is slowing.
The early Q4 hard data in Germany recovered a bit of ground yesterday.
Japan's GDP growth was revised up, to 0.4% quarter-on-quarter in Q3, from 0.1% in the preliminary reading.
China's January trade data were scheduled for release on Friday, but instead, the customs authority delayed the publication, saying it would publish the numbers with the February data
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.
Payroll growth has slowed, no matter how you slice and dice the numbers.
This week real data in Brazil supported the idea that the worst of the recession is likely over, but a V-shaped rebound is not in the cards.
PM Abe last week asked the cabinet to put together a package of measures in a 15-month budget aimed at bolstering GDP growth through productivity enhancement, in addition to the shorter-term goal of disaster recovery.
Hideous though the official April payroll numbers were, the chances are that they'll be revised down.
The probability of a rate hike on June 14, as implied by the fed funds future, has dropped to 90%, from a peak of 99% on May 5.
From a bird's-eye perspective, the argument for continued steady Fed rate hikes is clear.
The PBoC reduced its 14-day reverse repo by 5bp to 2.65% in a routine operation yesterday.
The FOMC did nothing yesterday and said nothing significantly different from its June statement, as was universally expected.
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.
LatAm assets and currencies had a bad November, due to global trade war concerns, the USD rebound and domestic factors.
Japan's jobless rate was unchanged, at 2.4% in October, as the market took a breather after September's job losses.
The key detail in Friday's barrage of economic data was the above-consensus increase in EZ inflation.
An inverted curve is a widely recognised signal that a recession is around the corner, though it's worth remembering that the lags tend to be long.
Rapidly increasing food inflation is creating all sorts of dilemmas for policymakers in Asia's giants.
Data released over the weekend confirm that the Peruvian economy enjoyed a strong second quarter. The economic activity index rose 6.4% year-over-year in May, well above market expectations, and up from 3.2% in Q1.
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.
The Monetary Policy Board of the Bank of Korea voted yesterday to lower its policy base rate to 1.25%, from 1.50%.
The long-awaited decisive upturn in wage growth still hasn't emerged. Year-over-year growth in average weekly wages, excluding bonuses, held steady at 2.6% in May.
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.
Friday's second Q1 GDP estimate confirmed that lockdowns to halt the spread of Covid-19 hurt the EZ economy in Q1. Real GDP plunged by 3.8% quarter-on- quarter, following a 0.1% rise in Q4, in line with the first estimate.
This week's labour market report--primarily reflecting conditions in March, though some data refer to April--will lift the veil on the initial economic damage from Covid-19, though the full horror will emerge only later.
Brazil's December industrial production and labour reports, released this week, confirmed that the recovery remained solidly on track at the end of last year.
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.
Signs of a slowdown in the labour market data are conspicuously absent.
The Brazilian economy fell into recession over the first half of the year due to the severity of the Covid shock on domestic demand.
Don't bet the farm on today's October payroll numbers, which will be hopelessly--and unpredictably-- compromised by the impact of hurricanes Florence and Michael.
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.
Argentina's inflation ended 2019 badly, and it is still too early to bet on a protracted downtrend, even after the renewed economic slowdown.
The passage of the House tax cut bill does not guarantee that the Senate will follow suit with its own bill, still less that both chambers will then be able to agree on a single bill which can then b e signed into law. As
We hope never to see another labour market report as bad as yesterday's, though the omens aren't good.
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.
We expect the BoK to hike this month, believing that it's necessary to curtail household debt growth now, in order to prevent a sharper economic slowdown as the Fed hiking cycle continues, China slows, and trade risks unfold.
Japan's Tankan survey for Q2 was unsurprisingly grim, given the devastation caused by the near- global lockdown in the first half of the quarter, and the nationwide state of emergency that enveloped April and May.
Yesterday's economic data in the Eurozone were soft.
The economy slowed less than we expected in 2017.
ADP's measure of May private payrolls undershot the official estimate by 5.6 million, surprising everyone after it nailed the April catastrophe.
Colombian policymakers on Friday cut the reference rate by 50bp, for a third straight month, to 2.75%.
We'll cover Friday's barrage of EZ economic data later in this Monitor, but first things first. We regret to inform readers that the ECB is behind the curve. Last week, Ms. Lagarde downplayed the idea that the central bank will respond to the shock from the Covid-19 outbreak.
Japan's labour data threw another January curve ball this year--last year it was wages--with a change in the standards for job openings.
Incoming data continue to highlight the severe hit from the pandemic on the real economies of the region, but some surveys and leading indicators are already pointing to a gradual upturn from June onwards.
Brazil's central bank kept the Selic policy rate at 6.50% this week, as markets broadly expected.
Following this week's 25bp Fed hike, the PBoC hiked the main interest rates in its corridor by... 5bp. The move was unexpected so the RMB strengthened modestly; commentary is full of how this means the deleveraging drive is serious.
The U.K. Monitor will be on a short break soon for paternity leave, so we are taking this opportunity to preview next week's data releases.
September's labour market report suggests that wage growth won't continue to rise for much longer.
The EZ Q4 GDP data narrowly avoided a downward revision in yesterday's second estimate.
China's trade surplus jumped to a six-month high of $46.8B in December, from $37.6B in November, on the back of a strong increase in exports.
October's 0.1% month-to-month fall in retail sales volumes was disappointing, following substantial improvements in the CBI, BRC and BDO survey measures.
The Fed will hike by 25 basis points today, citing the tightening labor market as the key reason to press ahead with the process of policy normalization. We think the case for adding an extra dot to the plot for both this year and next is powerful.
Today's MPC meeting and minutes are the first opportunity for Committee members to speak out in over a month, now that election "purdah" rules have lifted.
We remain confident--see here--that today's Q3 GDP report in Germany will be a shocker, but this already is priced-in by markets.
Japan's PPI data yesterday confirmed that October was a turning point for prices--due to the consumption tax hike--despite the surprising stability of CPI inflation in Tokyo for the same month.
Japan's GDP likely dropped by a huge 0.9% quarter-on-quarter in Q4, after the 0.5% increase in Q3, with risks skewed firmly to the downside.
Korea's jobs report for August was a stonker, with unemployment plunging to 3.1%, from 4.0% in July, marking the lowest rate in more than five years.
At first glance, the latest labour market data appear to be contradictory.
Industrial production in India turned around sharply in November, rising by 1.8% year-over-year, following October's 4.0% plunge and beating the consensus forecast for a trivial 0.3% uptick.
We're bracing for another ugly set of labour market data on Thursday, showing that both employment and earnings fell sharply in May and June.
We're expecting to see the sixth straight drop in initial jobless claims this week, though we think the 2,500K consensus forecast is too ambitious.
The Fed was more hawkish than we expected yesterday.
China's main activity data for October disappointed across the board, strengthening our conviction that the PBoC probably isn't quite done with easing this year.
The fall in CPI inflation to just 1.5% in October-- its lowest rate since November 2016--from 1.7% in September, isn't a game-changer for the monetary policy outlook.
Incoming activity data from Colombia over the past quarter have been surprisingly strong, despite many domestic and external threats.
The latest official data continue to understate the collapse in labour demand since Covid-19.
Consensus expectations for August's labour market data, released today, look well grounded.
Today's labour market figures look set to show that wage growth has continued to slow, fuelling speculation that interest rates are going nowhere soon. But a close examination of why wage growth has weakened suggests investors will be surprised by a robust rebound later this year.
Yesterday's economic activity data from Peru signalled that the relatively firm business cycle continues. The monthly GDP index accelerated to 3.6% year-over-year in November, rising from 2.1% in October, but marginally below the 4.4% on average in Q3. Growth continued to be driven by mining output, including oil and gas, which rose 15% year-over- year. The opening of several new mines explains the upturn, and we expect the sector to remain key for the Peruvian economy this year.
The Labour Force Survey continues to understate massively the damage caused by Covid-19.
CPI inflation held steady at 3.0% in October, undershooting our forecast and the consensus by 0.1 percentage point and the MPC's forecast by 0.2pp.
The most eye-catching aspect of December's consumer prices report was the pick-up in core inflation to 1.9%, from 1.8% in November, above the no-change consensus.
The Brexit-related slump in corporate confidence finally has taken its toll on hiring.
To avoid rocking the 2020 boat, the Phase One trade deal needed to be sufficiently vague, so that neither side, and particularly Mr. Trump, would have much cause to kick up a fuss around missed targets.
The BoJ is likely to be thankful next week for a relatively benign environment in which to conduct its monetary policy meeting.
China's official real GDP growth likely slowed to 6.0% year-over-year in Q3, from 6.2% in Q2.
China's September imports missed expectations, but commentators and markets tend to focus on the year-over-year numbers.
Governor Kuroda dropped further hints in speeches earlier this week that interest rates will be going up. He discussed methods of exit, in loose terms.
China's September trade numbers show that, far from reducing the surplus with the U.S., the trade wars so far have pushed it up to a new record.
Official industrial production growth in China plunged to 5.4% year-over-year in April, from 8.5% in March.
Yesterday's data in the EZ provided a little more evidence on what happened in Q1.
In one line: Unemployment nudges higher in Q3.
The economic momentum evident late last year carried into 2015, the Labor Department said Friday, with American employers adding 257,000 jobs in January as wage growth rebounded and more people joined the workforce
Chief U.S. Economist Ian Shepherdson on today's Payroll report
The FOMC yesterday did what it had to do, and said what it had to say. The super-doves were kicked into line, with a unanimous vote, though two members' blue dots showed they think rates should not have been raised. In our view, though, Dr. Yellen's avowed intention to raise rates gradually sits uneasily with her--correct--assertion that policy remains very accommodative, bearing in mind that the unemployment rate is now at the Fed's estimate of the Nairu, while evidence of accelerating wage gains is burgeoning.
Yesterday's surprising decline in the Eurozone unemployment rate adds further evidence to the story of a slowly healing economy. The rate of joblessness fell to 10.9% in July from 11.1% in June, the lowest since the beginning of 2012, mainly driven by a 0.5 percentage point fall in Italy, and improvement in Spain, where unemployment fell 0.2 pp to 22.2%.
Today's labour market figures likely will show that the Brexit vote has inflicted only minimal damage on job prospects so far. The unemployment rate likely held steady at 4.9% in the three months to September, and the risk of a renewed fall in unemployment appears to be bigger than for a rise.
The 21K rise in the headline, three-month average, unemployment rate between November and February confirmed last month that the U.K.'s period of fantastically strong growth in employment has ended. Timelier indicators, however, suggest unemployment is stabilising, not on the cusp of a major increase.
We think the FOMC's announcement this afternoon will not include the phrase "considerable time", signaling that the first rate cut will come at or before the middle of next year. At the same time, the Fed's new forecasts likely will show the unemployment rate falling into the Fed's estimated Nairu range this year, rather than the spring of 2016, as implied by their September forecasts.
The labour market in the Eurozone continues slowly to improve. The unemployment rate fell to 10.7% in October from 10.8% in September, reaching its lowest level since 2013. The divergence in rates, however, between the major economies remains significant. Unemployment in France, Italy and Spain is still above 10%, but the advance German number continued their record-breaking form in November.
If recent labor market trends continue, the four employment reports which will be released before the June FOMC meeting will show the economy creating about 1.1M jobs, pushing the unemployment rate down to 5.3%, almost at the bottom of the Fed's estimated Nairu range, 5.2-to-5.5%.
Fed Chair Yellen said nothing very new in the core of her Monetary Policy Testimony yesterday, repeating her view that rates likely will have to rise this year but policy will remain accommodative, and that the labor market is less tight than the headline unemployment rate suggests. The upturn in wage growth remains "tentative", in her view, making the next two payroll reports before the September FOMC meeting key to whether the Fed moves then.
Everyone is familiar by now with the conundrum in the labor market: How come wage gains have barely increased over the past few years even as the unemployment rate has fallen to very low levels, and business surveys scream that employers can't find the people they want? To give just one visual example of the scale of the apparent anomaly, our first chart shows the yawning gap between the headline unemployment rate and the rate of growth of hourly earnings, compared to previous cycles.
Korea's unemployment rate fell for a second straight month in October, inching down to 3.9%, from 4.0% in September.
The unemployment rate has now been at 4.1% for six straight months. This does not mean, though, that it's safe to assume it will remain there, or indeed that this level of unemployment can be sustained without eventually triggering a meaningful increase in inflation.
Japan's unemployment rate returned unexpectedly to its 26-year low of 2.3% in February, falling from 2.5% in January.
Workers in the euro area remain scarred by the zone's repeated crises, but the strengthening cyclical recovery is slowly starting to spread to the labour market. The unemployment rate fell to a three-year low of 10.9% in July, and employment has edged higher after hitting a low in the middle of 2013. Germany's outperformance is a key story, with employment increasing uninterruptedly since 2009, and the unemployment rate declining to an all-time low of 6.4%. Among the other major economies, the unemployment rate in Spain and Italy remains higher than in France. But employment in Spain has outperformed in the cyclical recovery since 2013.
We expected a modest correction in the number of job openings in July, following the surge over the previous few months, but instead yesterday's JOLTS report revealed that openings jumped by a mind-boggling 8.1% to a new record high. In the three months to July, the number of openings soared at a 35% annualized rate. As a result, the Beveridge Curve, which compares the number of openings to the unemployment rate, is now further than ever from normalizing after shifting out decisively in 2010.
...The Fed told investors that it now requires only "some further improvement" in labor market conditions before starting to raise rates-- the "some" is new--but did not set out any specific conditions. With the unemployment rate now just a tenth above the top of the Fed's Nairu range, 5.0-to-5.2%, and very likely to dip into it by the time of the decision on September 17, while payroll growth is trending solidly above 200K per month, rates already would have been raised some time ago in previous cycles.
The two key planks of the argument that a substantial easing of fiscal policy won't be inflationary are that labor participation will be dragged higher, limiting the decline in the unemployment rate, while productivity growth will rebound, so unit labor costs will remain under control.
The Korean unemployment rate edged back up to 3.7% in November from October's 3.6%. Young graduates--the usual suspects--accounted for most of the rise.
Korea's jobs report for January was nasty. The unemployment rate spiked to 4.4%, from 3.8% in December, marking the highest level in nine years.
Based on key economic indicators, the Eurozone economy is doing splendidly, relative to its performance in recent years. Real GDP has been growing at 1.6%-to-1.7% year-over-year since the first quarter of last year, bank credit has expanded, and the unemployment rate is declining.
The Fed's action, statement, and forecasts, and Chair Yellen's press conference, made it very clear the Fed is torn between the dovish signals from the recent core inflation data, and the much more hawkish message coming from the rapid decline in the unemployment rate.
Yesterday's data were second-tier in the eyes of the markets, but not, perhaps in the eyes of the Fed. The continued surge in job openings, which reached a 14-year high in December, means that the Beveridge Curve--which links the number of job openings to the unemployment rate--shows no signs at all of returning to normal.
The French labour market improved much more than we expected in Q4. The headline unemployment rate plunged to 8.9%, from a downwardly-revised 9.6% in Q3.
At a stroke, the October payroll report returned the short-term trend in payroll growth to the range in place since 2011, pushed the unemployment rate into the lower part of the Fed's Nairu range, and lifted the year-over-year rate of growth of hourly earnings to a six-year high. The FOMC has never quantitatively defined what it means by "some further improvement in the labor market", its condition for increasing rates, but if the October report does not qualify, it's hard to know what might fit the bill. We expect a 25bp increase in December.
The stand-out news yesterday was the increase in the headline, three-month average, unemployment rate to 4.4% in December, from 4.3% in September.
Surprise stability in Korea's unemployment rate won't last. Risks to Japan's current account surplus are weighted to the downside
China still is on track for mild CPI deflation by Q4, PPI deflation in China has bottomed out , Core machine orders in Japan tank in the wake of the state of emergency, Adverse base effects from last year's tax hike will delay Japan's exit from PPI deflation, Surprise spike in Korea's unemployment rate makes sense given the plunge in jobs created
We read after the employment report that the drop in the unemployment rate was somehow not significant, because it was due in p art to a reported 41K drop in the size of the labor force, completing a 404K cumulative contraction over the three months to August. In our view, though, analysts need to take a broader approach to the picture painted by the household survey, which is much more volatile and less reliable than the payroll survey over short periods.
The two big surprises in the September employment report--the drop in the unemployment rate and the flat hourly earnings number--were inconsequential, when set against the sharp and clear slowdown in payroll growth, which has further to run.
Job losses in the over-60 group pull Korea's unemployment rate higher in December. Japanese M2 growth holds steady in December. Still no clear signs of a recovery in machine tool orders in Japan.
Japan's stable unemployment rate belies underlying weakness. Tokyo energy inflation turns the corner. Sales tax preparations breathe life into Japanese production in May... if only temporarily. Korea's IP plunge in May shows why Japan can't rest on its laurels.
Data yesterday showed that the downward trend in Eurozone unemployment continued towards the end of last year. The unemployment rate fell to 10.4% in December from 10.5% in November, extending an almost uninterrupted decline which began in the first quarter of 2013.
Punchy output gains from China's manufacturers will soon give way. A mixed bag for China's non-manufacturing sectors at the start of Q3. Don't be fooled by the June slip in Japan's unemployment rate. Expect only a mild recovery in Japanese industrial production, for now. Korean production ended Q2 on a strong note.
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
BoJ snubs the doves. Japan's unemployment rate downtick was minimal. The weak external backdrop dominates Japan's pre-tax front-loading industrial activity.
If the Fed needed further encouragement to raise rates next month, it arrived Friday in the form of solid jobs numbers, a new cycle low for the broad unemployment rate, and a new cycle high for wage growth.
Big gains in the size of the labour force continue to flatter Korea's unemployment rate. Japan's exit from PPI deflation will be followed by only modest inflation.
The core economic narrative in U.S. markets right now seems to run something like this: The pace of growth slowed in Q1, depressing the rate of payroll growth in the spring. As a result, the headline plunge in the unemployment rate is unlikely to persist and, even if it does, the wage pressures aren't a threat to the inflation outlook.
We're guessing Fed Chair Yellen would have preferred to have another acceleration in hourly earnings and a dip in the unemployment rate along side the hefty 211K leap in November payrolls, but no matter. At its October meeting, the Fed wanted to see "some further improvement in the labor market", and by any reasonable standard a 509K total increase in payrolls in two months fits the bill.
A couple of Fed speakers this week have described the economy as being at "full employment". Looking at the headline unemployment rate, it's easy to see why they would reach that conclusion.
Should you be feeling in the mood to panic over inflation risks--or more positively, benefit from the markets' underpricing of inflation risks--consider the following scenario. First, assume that the uptick in wages reported in October really does mark the start of the long-awaited sustained acceleration promised by a 5% unemployment rate and employers' difficulty in finding people to hire. Second, assume that the rental property market remains extremely tight. Third, assume that the abrupt upturn in medical costs in the October CPI is a harbinger o f things to come. And finally, assume that the Fed hawks are right in their view that the initial increase in interest rates will--to quote the September FOMC minutes--"...spur, rather than restrain economic activity". Under these conditions, what happens to inflation?
German labour market data continue to break records on a monthly basis. The unemployment rate was unchanged at 6.2% in A pril, with jobless claims falling 16,000, following a revised 2,000 fall in March. March employment rose 1.2% year-over-year, down slightly from 1.3% in February, but the total number of people in jobs rose to a new high of 43.4 million.
We argued yesterday that the August payroll number is unlikely to be a blockbuster, thanks to a combination of problems with the birth/death model and the strong tendency for this month's jobs number to be initially under-reported and then revised substantially higher. But these arguments don't apply to the unemployment rate, which is derived from the separate household survey.
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.
Youth unemployment remains a blemish on the Eurozone economy, despite an increasingly resilient cyclical recovery. The unemployment rate for young workers aged 15-to-24 years stood at 18.4% at the end of April, chiefly due to high joblessness in the periphery.
Another month, another bleak Brazilian labor market report. The seasonally adjusted unemployment rate increased marginally to 8.3% in December, up from 8.2% in November, much worse than the 5.1% recorded in December 2014.
Japan's unemployment rate edged back up to 2.5% in February after the drop in January to 2.4%.
Mexico's economy hit a sticky patch in the first quarter, with confidence slipping, employment growth slowing and the downward trend in unemployment stalling. Indeed, the headline unemployment rate rose to 4.5% in May from 4.3% in April. The seasonally adjusted rate, though, was little changed at 4.4%, with a stable participation rate.
Chief U.K. Economist Samuel Tombs on U.K. Inflation
Chief US economist Ian Shepherdson on the latest Jobs report
Chief US economist Ian Shepherdson on the latest Jobs report
Chief US economist Ian Shepherdson on the latest Jobs report
Senior International Economist Andres Abadia on Chile's jobless rate
Chief U.S. Economist Ian Shepherdson on U.S. payroll gains
Provocative notes from Ian Shepherdson, the Chief Economist at Pantheon Macroeconomics
Chief U.K. Economist on U.K. Unemployment Q2
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