Pantheon Macroeconomics - Pantheon Macroeconomics aims to be the premier provider of unbiased, independent economic intelligence to financial market professionals around the world.

Independent Incisive Illuminating

Skip to Main Content

Website Search Results

Does your search relate to our macroeconomic publications?
If so, you can use the advanced filters to the right to refine your search.

265 matches for " wages":

6 May. 2016 Payrolls Likely On Trend - Watch Out for a Rebound in Wages (My Publications)

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.

21 November. 2016 The Inflation Threat from Wages is Rising (My Publications)

Last week, the Atlanta Fed updated its median hourly earnings series with new October data, showing wage growth accelerating to an eight-year high of 3.9%. That's a full percentage point higher than the increase in this measure of wages in the year to October 2015, and it follows a spring and summer during which wage growth appeared to be topping-out at just under 3½%.

2 May. 2016 ECI Core Wages Tell the Story Hidden by Calendar Quirks in AHE (My Publications)

For most of the decade since the whole-economy average hourly earnings numbers were first published, the year-over-year rate of increase has run faster than the ECI measure of private sector wages and salaries, excluding incentive-paid occupations. But in the first quarter of this year, the ECI measure rose 2.5% year-over-year, the fastest increase in six years, while hourly earnings rose 2.3%. That difference might not sound like much, but it matters a good deal when put into context.

21 February 2017 Wages Don't Necessarily Lead Inflation, but Unit Labor Costs do (My Publications)

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".

11 Jan. 2016 Payroll Growth Will Slow in Q1, But Wages Will Accelerate (My Publications)

Payroll growth will slow in the first few months of next year, but wages will accelerate. This might seem counter-intuitive after the ballistic December jobs number coupled with sluggish-looking hourly earnings, but the devil, as always, is in the details. On the face of it, the trend in payroll growth is accelerating at a startling pace, captured in our first chart. But we very much doubt this reflects a real shift in the underlying pace of employment growth, for two reasons. First, payroll growth in recent years has tended to accelerate in the fourth quarter, even when indicators of both labor demand and the pace of layoffs--the two sides of the payroll equation--have been flat, as in Q4.

10 Mar. 2016 Calendar Distortions Plague the Hours Data, Not Just Wages (My Publications)

We've had some correspondence questioning our view on the "weakness" of February hourly earnings, which we firmly believe were depressed by a persistent calendar quirk. Almost nine times in 10 over the past decade, when the 15th of the month has fallen after the week of the 12th--the payroll survey week--the monthly gain in wages has undershot the prior trend.

01 May. 2015 Fed doves on the defensive as wages break to the upside (My Publications)

The 0.7% first quarter increase in the ECI measure of private sector wages and salaries raised the year-over-year rate to 2.8%, the highest since late 2008 and significantly stronger than the 2.1% increase in hourly earnings in the year to March.

08 Feb. 2016 If the Fed Focuses on Wages, They'll Hike in March (My Publications)

The Fed's decisions over the next few months hinge on the relative importance policymakers place on the apparent slowdown in payroll growth and the unambiguous acceleration in wages. We qualify our verdict on the payroll numbers because the January number was very close to our expectation, which in turn was based largely on an analysis of the seasonals, not the underlying economy.

07 October. 2016 Payrolls Likely Unexciting Last Month, But Wages Should Rebound (My Publications)

Private sector payroll growth has averaged 190K over the past year, but the six-month average has slowed to 150K. The downshift is consistent with the weakening in survey-based measures of hiring intentions, which began to soften at the turn of the year.

11 July. 2016 Jobs Overstate Economic Volatility, Wages Will Soon Matter More (My Publications)

Whatever you might think about the state of the U.S. economy, it is not as volatile as implied by the past few months' payroll numbers. Assuming steady productivity growth in line with the recent trend, the payroll data suggest the economy swung from bust to boom in one month, with not even a pause for breath.

08 Jan. 2016 Expect Robust Jobs Data, but Downside Risk for Wages (My Publications)

The underlying trend in payroll growth is running at about 225K-to-250K, perhaps more, and the leading indicators we follow suggest that's a reasonable starting point for our December forecast. The trend in jobless claims is extraordinarily low and stable--the week-to-week volatility is eye-catching, especially over the holidays, but unimportant--and indicators of hiring remain robust. The unusually warm weather in the eastern half of the country between the November and December survey weeks also likely will give payrolls a small nudge upwards, with construction likely the key beneficiary, as in November.

11 September 2017 Hurricane Reconstruction Will Lift Wages, Inflation, and the Deficit (My Publications)

As we reach our Sunday afternoon deadline, Hurricane Irma is pounding Florida's west coast with an intensity not seen since Andrew, in 1992.

2 Mar. 2015 If Real Wages are Key for the Fed, Policy Will Change Very Soon (My Publications)

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%.

30 Mar. 2015 Output Gap Uncertainty Paralysis Keeps the Fed's Focus on Wages (My Publications)

Perhaps the biggest single reason for the Fed's reluctance, so far, to move away from monetary policy designed to cope with catastrophe is that no-one knows for sure how much of the damage has been repaired, and how close the economy is to normalizing.

7 August 2017 Japan's Wage Drop not so Damaging as Regular Wages Rise (My Publications)

Japanese average cash earnings posted a surprise drop of 0.4% year-over-year in June, down from 0.6% in May and sharply below the consensus for a rise of 0.5%. The decline was driven by a fall in the June bonus, by 1.5%.

26 Jan. 2015 All Eyes on ECI - Nothing Matters More to the Fed than Wages (My Publications)

This week is, potentially, hugely important in determining the Fed's near-term view of the real state of the labor market and its approach to monetary policy over the next few months. The key event is the release of the fourth quarter employment cost index, which could make a material difference to perceptions of the degree of wage pressure.

23 May. 2016 Will Profit Margins in Germany be Squeezed by Higher Wages? (My Publications)

Margins for German manufacturing firms remained depressed at the start of the second quarter. The headline PPI rose 0.1% month-to-month in April, pushing the year-over-year rate down marginally to -3.1% from a revised -3.0% in March. Falling energy prices are the key driver of the overall decline in the PPI.

14 June 2017 Fact-checking the ECB on Low Wages and Employment in the EZ (My Publications)

Today's employment report in the euro area should extend the run of positive labour market data. We think employment rose 1.4% year-over-year in Q1, accelerating marginally from a 1.2% increase in Q4.

04 Mar. 2016 Downside Risks for Payrolls and Wages, but Trends are Solid (My Publications)

The underlying trend in payroll growth probably has not changed significantly from the 228K average monthly gains recorded last year. But the average hides wide variations, some triggered by seasonal adjustment problems and others by one-time weather effects or unavoidable and random sampling error. January's below-trend 151K increase was likely a victim of seasonal problems, because payroll gains in recent years have tended to be soft at the start of the year after outsized fourth quarter increases.

13 Jan. 2016 How Fast Can the Fed Allow Wages to Rise? (My Publications)

The leading wage indicators in the December NFIB survey, released in full yesterday--some of the labor market components appears a few days in advance, ahead of the official payroll report--all point to a substantial acceleration over the next six-to-nine months. Our first two charts show the NFIB jobs-hard-to-fill number and expected compensation numbers, respectively, compared to the rate of growth of hourly earnings. The message is extremely clear.

11 September 2017 The German Trade Surplus is Falling, but Real Wages are Rising (My Publications)

The seasonally adjusted trade surplus in Germany slipped to €19.6B in July, from €21.2B in June, its lowest since April, and we are confident that it has peaked for this cycle.

14 Jan. 2016 Does Cost-Push Inflation Give the Fed the Luxury of Time? (My Publications)

In yesterday's Monitor we set out the risk that accelerating wages will force the Fed to raise rates more quickly than expected, but we didn't have space to address the underlying premise of this story, namely, the idea that inflation is largely a cost-push phenomenon. From the perspective of fixed income investors, it might not seem to matter whether this is a realistic description of the inflation process, because Fed Chair Yellen believes it wholeheartedly, and her hands are on the levers of monetary policy.

20 July 2017 Retail Sales Likely Jumped in June, but the Trend Remains Weak (My Publications)

Surveys suggest that today's retail sales figures will show that sales volumes increased by around 1% month-to-month in June, significantly exceeding the consensus, 0.4%. But the pickup in June likely will be just a blip; the further intensification of the squeeze on real wages and a tightening of unsecured lending standards will keep retail sales on a flat path in the second half of 2017.

07 Mar. 2016 Wage Pressures are Building - Fed Inaction Will Hurt, Later (My Publications)

Whatever you do, don't fret over the apparent loss of momentum in the wages numbers; it's a classic statistical head fake, as we pointed out in Friday's Monitor, before the report. When the 15th of the month--payday for people paid semi monthly-- falls after the employment survey week, the BLS fails properly to capture their income, and hourly earnings are under-reported.

16 February 2017 Slowdown in Wage Growth Further Reduces 2017 Rate Hike Chances (My Publications)

Yesterday's labour market data delivered a further blow to hopes that consumers' spending will retain enough momentum for the MPC to press ahead and raise interest rates this year. The most striking development is the decline in year-over-year growth in average weekly wages to just 1.9% in December, from 2.9% in November.

29 Feb. 2016 Core PCE Inflation Will Breach the Target This Year, Two Years Early (My Publications)

When we argue that the Fed will have to respond to accelerating wages and core prices by raising rates faster than markets expect, a frequent retort is that the Fed has signalled a greater tolerance than in the past for inflation overshoots.

23 Nov. 2015 How to Scare Yourself Over the U.S. Inflation Outlook (My Publications)

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?

7 June. 2016 Atlanta Fed Wage Tracker Hits Seven-Year High - Does it Matter? (My Publications)

The headline hourly earnings data for May were dull, showing the year-over-year rate unchanged at 2.5%. That's up from 2.1% in the year to May 2015, but it's not an alarming rate of increase. But the Atlanta Fed's median hourly earnings data, which track the wages of individuals from year-to-year, show wages up 3.4% year-over-year, the fastest rate of increase since February 2009.

5 December. 2016 Labor Market Tightening Continues (My Publications)

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.

BUSINESS INSIDER - Wages for American workers still look like they are about to go higher (News and Media)

In January, average hourly wages grew 0.5% over the prior month, the biggest month-on-month increase since November 2008......Ian Shepherdson at Pantheon Macro said the outlook for wage growth is still strong

27 Feb. 2015 M1 growth is sending a very bullish on the Eurozone economy (My Publications)

Economic data in the Eurozone are sending an increasingly upbeat message on the economy. Yesterday saw a barrage of numbers, but the most startling of them was the continued acceleration in the money supply.

26 Oct. 2015 MPC Can't Wait too Long After the U.S. Fed Raises Rates (My Publications)

Markets currently judge that U.K. interest rates will rise about six months after the first Fed hike. But the Bank of England seldom lagged this far behind in the past. Admittedly, the slowdown in the domestic economy that we expect will require the Monetary Policy Committee to be cautious. But wage and exchange rate pressures are likely to mean six months is the maximum period the MPC can wait before following the Fed's lead.

27 Apr. 2015 Accelerating high-wage job growth to lift hourly earnings? (My Publications)

We have argued for some time that the hourly earnings data, which take no account of changes in the mix of employment by industry or occupation, have been depressed over the past year by the relatively rapid growth of low-paid jobs.

27 June 2017 Japanese Inflation to Hold up as Food Prices Counterbalance Energy (My Publications)

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.

27 June 2017 Mexican Economic Growth Will be Sustained over the Second Half (My Publications)

Economic activity in Mexico during the past few months has been relatively resilient, as external and domestic threats appear to have diminished.

26 January 2017 GDP Growth Remained Brisk in Q4, but Headwinds are Building (My Publications)

Today's preliminary estimate of Q4 GDP likely will show that the Brexit vote has not caused the economy to slow yet. But growth at the end of last year appears to have relied excessively on household spending, which has been increasingly financed by debt. GDP growth likely will slow decisively in Q1 as the squeeze on households' real incomes intensifies.

25 May. 2016 Growth in Mexico Consumers' Spending Remain Resilient (My Publications)

Improving consumer fundamentals continue to underpin growth in private spending in Mexico, according to retail sales and inflation reports published this week. March retail sales were much stronger than expected, jumping 3.0% month-to-month, after averaging gains of 0.8% in the preceding three months. And sales for the three months through February were revised up marginally.

25 May 2017 Is it Time to Tell a Less Upbeat Story on the Eurozone Consumer? (My Publications)

Markets cheered soaring business surveys in the Eurozone earlier this week, and recent consumer sentiment data also have been cause for celebration. The advance GfK consumer confidence index in Germany rose to a record high of 10.4 in June, from 10.2 in May.

25 August. 2016 Surging Net Exports Prevented a Q2 GDP Contraction in Germany (My Publications)

Yesterday's final Q2 GDP report in Germany confirmed the initial data showing that the economy slowed less than we expected last quarter. Real GDP rose 0.4% quarter-on-quarter in Q2, after a 0.7% jump in Q1. The working-day adjusted year-over-year rate fell marginally to 1.8%, from 1.9% in Q1.

26 August. 2016 No Clear Steer Likely From Yellen Today, After the Spring Debacle (My Publications)

Chair Yellen's speech at Jackson Hole at 10am Eastern time today has the potential to move markets substantially, but that's not our core expectation. It's more likely, we think, that Dr. Yellen will stick to the core FOMC view, which remains that "only gradual increases" in rates will be required, and that rates are "likely to remain, for some time, below levels that are expected to prevail in the longer run".

26 Feb. 2016 The Foundations of the U.K. Recovery are Remarkably Fragile (My Publications)

The preliminary estimate of a 0.5% quarter-on-quarter rise in GDP in the fourth quarter of 2015 was left unrevised, but that was the only nugge t of good news from yesterday's second GDP release. The expenditure breakdown hardly could have looked more troubling.

26 June 2017 Japan Surprises on the Upside as the Economy Accelerates into Q2 (My Publications)

Japanese data continue to come in strongly for the second quarter. The manufacturing PMI points to continued sturdy growth, despite the headline index dipping to 52.0 in June from 53.1 in May. The average for Q2 overall was 52.6, almost unchanged from Q1's 52.8, signalling that manufacturing output growth has maintained its recent rate of growth.

27 May. 2015 After the Surge - A Positive Trend in EZ Household Consumption? (My Publications)

Data today will likely show that consumer sentiment in the Eurozone remains firm. In Germany, we expect a slight dip in the advance headline GFK confidence index to 9.8 in June, from an all-time high of 10.1 in May.

26 May 2017 Mexican Consumption Will Slow as Tighter Financial Conditions Bite (My Publications)

Consumers' spending in Mexico was relatively resilient at the end of Q1, but we think it will slow in the second quarter. Data released this week showed that retail sales rose a strong-looking 6.1% year-over-year in March, well above market expectations, and up from 3.6% in February.

29 Jan. 2016 Little to Console the Optimists in Fourth Quarter GDP (My Publications)

The preliminary estimate of a 0.5% quarter-on-quarter rise in GDP in Q4 slightly exceeded our expectation and the third quarter's growth rate, both 0.4%. Nonetheless, there was little to console the optimists in the figures. The recovery remains unbalanced, with industrial production and construction output falling by 0.2% and 0.1% respectively, while services output rose 0.7% quarter-on-quarter.

30 Jan. 2015 Downside Risk for Fourth Quarter GDP Growth - Inventories a Risk (My Publications)

We are nervous about the first estimate of fourth quarter GDP growth, due today. The consensus forecast is a decent 3.1%, but we are struggling mightily to get anywhere near that.

3 April 2017 Eurozone Consumers Likely had a Slow Start to 2017 (My Publications)

We fear that private spending in the EZ slowed in Q1, despite rocketing survey data. This fits our view that household consumption will slow in 2017 after sustained above-trend growth in the beginning of this business cycle.

25 April 2017 Mexico's IGAE Confirms a Surprisingly Firm Economy in Q1 (My Publications)

Economic activity in Mexico during the past few months has been stronger than most observers expected. Growth has certainly moderated from the relatively strong pace recorded during the second half of last year, but data for January and February show that it is still quite strong.

3 Dec. 2015 Yellen Throws Down the Gauntlet, But Gently, Leaving Get-Outs (My Publications)

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.

3 February 2017 MPC Signals Newfound Supply Optimism, no Near-Term Rate Hike (My Publications)

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.

30 January 2017 Will the Inflation Report Support Markets' 2017 Rate Hike View? (My Publications)

Markets' expectations for official interest rates have shifted up over the last fortnight, and the consensus view now is that the MPC will hike rates before the end of this year. As our first chart shows, the implied probability of interest rates breaching 0.25% in December 2017 now slightly exceeds 50%.

29 June 2017 A Single Rate Hike Would Risk a Harmful Rise in Rate Expectations (My Publications)

The MPC's hawks are framing the interest rate increase they want as a "withdrawal of part of the stimulus that the Committee had injected in August last year", arguing that monetary policy still would be "very supportive" if rates rose to 0.5%, from 0.25%.

29 Jan. 2016 Data and Copom Minutes Point to no Change in Brazilian Rates (My Publications)

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.

28 July 2017 The Eurozone is in fine form, as we start our summer break (My Publications)

This is the final report before your scribe disappears into the Scottish Highlands for a few weeks, and we are leaving you with a Eurozone economy in fine form. The calendar will be relatively light in our absence and will tell us what we already know; namely that the euro area economy maintained its strong momentum in Q2.

3 February 2017 Upside Risk For Payrolls and Hourly Earnings in January Data Today (My Publications)

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.

29 Jan. 2016 Will Inventories and Government Hold Q4 GDP Close to Zero? (My Publications)

We expect to learn today that the economy barely grew at all in the fourth quarter. At least, that's what we think the first estimate of growth, due today, will show. This number will then be revised twice over the next couple of months, then again when revisions for the past three years are released in July. Thereafter, the numbers are subject to further annual revisions indefinitely.

30 May 2017 Should Investors Start to Fear a Hung Parliament? (My Publications)

The Conservatives' opinion poll rating has fallen dramatically over the last 10 days or so, pushing sterling down and forcing investors to confront the possibility that Theresa May might not increase her majority much from the current paltry 17 MPs.

28 July 2017 The Downturn in Housing Market Activity has Further to Run (My Publications)

Equity prices for companies dependent on the U.K.'s residential property market tumbled yesterday as several companies reported poor results for the first half of 2017. Most companies blamed a decline in housing transactions for falling profits.

22 Apr. 2015 Sustained job gains are key to Eurozone consumers sentiment (My Publications)

Advance April consumer survey data will likely confirm that households remain the standout driver of the cyclical recovery in the euro area. We think the headline EC consumer sentiment index rose to -1.0 in April from -3.7 in March.

21 March 2017 Real Wage Growth in the Eurozone is Being Hit by Higher Inflation (My Publications)

One of the key characteristics of this euro area business cycle has been near-zero inflation due to structurally weak domestic demand and depressed prices for globally traded goods and commodities. This has supported real incomes, despite sluggish nominal wage growth.

21 Mar. 2016 The Periphery is Slowly Regaining Competitiveness in the Eurozone (My Publications)

Labour costs growth accelerated modestly last year in the Eurozone. Data on Friday showed that Q4 nominal labour costs in the Eurozone rose 1.3% year-over-year, slightly higher than the 1.1% increase in Q3. The modest acceleration was mainly due to a rise in "non-business" labour costs, which rose 1.6% year-over-year, up from a 0.9% increase in Q3.

21 Oct. 2015 Are Payrolls Slowing Because the Pool of Labor Has Evaporated? (My Publications)

One of the possible explanations for the slowdown in payroll in growth in recent months is that the pool of labor has shrunk to the point where employers can't find the people they want to hire. That's certainly one interpretation of our first chart, which shows that the NFIB survey's measure of jobs-hard-to-fill has risen to near-record levels even as payroll growth has slowed.

21 September 2017 German PPI Inflation Set to Edge Lower into Year-End (My Publications)

German producer price inflation rebounded last month. The headline PPI index rose 2.6% year-over-year in August, up from a 2.3% increase in July, driven almost exclusively by a jump in energy inflation.

30 May 2017 Why Don't Markets Take the Fed's Interest Rate Forecasts Seriously? (My Publications)

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.

21 Mar. 2016 The Fed Either Hopes for a Miracle or Wants Inflation to Overshoot (My Publications)

Fed Chair Yellen made it clear in last week's press conference that she is not convinced the increase in core inflation will persist: "I want to warn that there may be some transitory factors that are influencing [the rise in core inflation]... I see some of that is having to do with unusually high inflation readings in categories that tend to be quite volatile without very much significance for inflation over time.

21 July 2017 Don't Bet the Farm on a Major QE Decision in September (My Publications)

The ECB pressed the repeat button yesterday. The central bank maintained its refinancing rate at 0.00%, and also kept the deposit and marginal lending facility rate at -0.4% and 0.25 respectively. The pace of QE was held at €60B per month, scheduled to run until the end of December, "or beyond, if necessary."

20 March 2017 The BCCh Leaves Open a Tiny Space for Further Easing (My Publications)

Chile's central bank cut the policy rate 25bp last week to 3.0%, in line with consensus, amid easing inflationary pressures. The timing of the rate cut was no surprise; in January, the BCCh cut rates for the first time in more than two years, and kept a dovish bias.

20 June. 2016 How Can the Fed Escape From the Loop of Endless Inaction? (My Publications)

For some time, the Fed has been locked in a loop of endless inaction. Every time the economic data improve and the Fed signals it is preparing to raise rates, either markets--both domestic and global-- react badly, and/or a patch of less good data appear. The nervous, cautious Yellen Fed responds by dialling back the talk of tightening, and markets relax again, until the next time.

20 October. 2016 Rising Prices Will Arrest the Strong Trend in Retail Sales Next Year (My Publications)

It's hard to have much conviction in any forecast for September retail sales, as the relationship between the official data and the surveys has weakened considerably.

21 Apr. 2015 Survey evidence signalling faster wage gains is mounting (My Publications)

We have argued for some time that the plunge in gasoline prices will constrain core inflation over the course of this year, by reducing production and distribution costs for a broad array of goods.

21 Apr. Retail Sales Likely to Disappoint in March Due to Weak Easter Trading (My Publications)

Signs that Easter trading was unusually poor lead us to anticipate a downside surprise from today's retail sales data for March. The BRC's Retail Sales Monitor, which surveys companies that account for 60% of total retail sales, was remarkably weak in March.

22 August 2017 Is the Worst Over for State and Local Government Spending? (My Publications)

Consumption and investment spending by state and local government accounts for just over 10% of the U.S. economy, making it more important than exports or consumers' spending on durable goods, and roughly equal to all business investment in equipment and intellectual property.

22 August 2017 Tourism is Key to Financial Stability in the Spanish Economy (My Publications)

Last week's attacks in Barcelona--one of Spain's most popular tourist spots--struck at the heart of one of the economy's main growth engines.

23 September. 2016 How to Read the Split FOMC's Confusing Thought Processes (My Publications)

Over the past few days we have written about the difference between the Fed's tactics--signalling rate hikes and then choosing not to act in the face of weaker data--and its strategy, which is to normalize rates in the expectation that inflation will head to 2% in the medium-term.

23 Oct. 2015 U.K. Consumer Recovery is Not as Robust as Retail Sales Suggest (My Publications)

On the face of it, the surge in retail sales volumes in September suggests that the U.K. consumer is in fine fettle and can prevent the economic recovery from losing momentum as exporters struggle and government spending retrenches. But the underlying picture is less encouraging and consumers won't be able to sustain the recent robust growth in real spending when inflation revives next year.

24 April 2017 Past Errors Mean Investors Should Treat the Latest Polls Cautiously (My Publications)

Sterling jumped last week to its highest level against the dollar since last October in response to news that a general election will be held on June 8. Markets are betting that the Conservative Government will sharply increase its majority, enabling Theresa May to ignore Eurosceptic backbenchers when she strikes a deal with the EU.

24 Feb. 2015 Germany is Growing, But Not as Fast as Implied by the Surge in Q4 (My Publications)

Sentiment in Germany has improved slightly this month with the IFO business climate index rising to 106.8 from 106.7 in January, pushed higher by a small increase in the expectations index.

24 February 2017 German Economy did Well in Q4, but What Happened to Net Trade? (My Publications)

Yesterday's detailed German GDP report raised more questions than it answered. The headline confirmed that growth accelerated to 0.4% quarteron- quarter in Q4, from 0.1% in Q3, leaving the year-over- year rate unchanged at 1.7%.

23 Oct. 2015 BCB Stuck Between Inflation Risks and Deep, Long Recession (My Publications)

Brazil economic and political outlook is still opaque, but grim, after a vast array of negative news. Impeachment of President Rousseff remains a possibility; the process of fiscal consolidation is messy and politically bloody; rumors that Finance Minister Levy might leave his post next year have intensified; and the latest data showed that the recession worsened in Q3. As a consequence, the BRL and interest rates have been under pressure and we see no clear signs that the turmoil will ease soon.

23 May 2017 Has the Outlook for Business Investment Brightened? (My Publications)

The recent deceleration in households' real spending means that either business investment or net exports will have to pickup if the economy is to avoid a severe slowdown this year.

22 July. 2016 July Payrolls Won't Excite Markets, but Hourly Earnings Should (My Publications)

This is the final Monitor before we hit the beach for two weeks, so want to highlight some of the key data and event risks while we're out. First, we're expecting little more from the FOMC statement than an acknowledgment that the labor market data improved in June. After the May jobs report, the FOMC remarked that "...the pace of improvement in the labor market has slowed".

22 August. 2016 Will Inflation be the Dog That Doesn't Bark, Again? (My Publications)

The period of surprisingly low inflation following sterling's plunge when the UK left the Exchange Rate Mechanism in September 1992 appears to challenge our view that inflation will overshoot the MPC's 2% target over the next couple of years. As our first chart shows, CPI inflation averaged just 2.5% in 1993 and 2% in 1994, even though trade-weighted sterling plunged by 15% and import prices surged.

22 March 2017 Greece, the EU and the IMF are Sleepwalking into Crisis... Again (My Publications)

Another deadline has come and gone in the negotiations between Greece and its creditors. This week's meeting between EU finance ministers revealed that the creditors have not seen enough commitments unlock the €7B Greece needs to repay in July. Mr. Tsipras has agreed to energy sector privatizations, and to increase the threshold for income tax exemption.

23 June 2017 Fed Officials Cite "Full Employment" but Worry About Recent CPI Data (My Publications)

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.

23 Mar. 2015 Brazil's Inflation Target is Wishful Thinking for 2015 - Maybe in 2016 (My Publications)

The bad news just keeps coming for Brazil's economy. The mid-month CPI, the IPCA-15 index, rose 1.2% month-to-month in March. Soaring energy prices remain the key contributor to the inflation story in Brazil, pushing up the housing component by 2.8% in March, after a 2.2% increase in February.

24 October. 2016 Why are Households Running Such Large Bank Balances? (My Publications)

The U.S. household sector carries substantial gross debts, even after the sustained deleveraging since the crash of 2008. The gross debt-to-income ratio stood at 105.3% in the second quarter of this year, down from the 135% peak in late 2007 but still well above the 88% average recorded in the 1990s, which was not a decade of restraint on the part of consumers.

5 April 2017 EZ Retail Sales Snap Back, but Q1 Outlook Still looks Poor (My Publications)

Data yesterday showed that consumers in the euro area increased their spending in February, following recent weakness. Retail sales rose 0.7% month-to-month in February, reversing the cumulative 0.4% decline since November. The year-over-year rate was pushed higher to 1.8% from an upwardly revised 1.5% in January.

8 Apr. 2016 How Far Will the Labor Share in GDP Rise? (My Publications)

As recently as late 2008, the share of employee compensation in GDP was slightly higher than the average for the previous 20 years. But it would be wrong to argue, therefore, that the squeeze on labor is a phenomenon only of the past few years. It's certainly true that labor's share dropped precipitously from 2009 through 2011, and has risen only marginally since then.

7 Oct. 2015 Are Payrolls Slowing Because There's No-one Left to Hire? (My Publications)

In the absence of market-moving data today, we want to take a closer look at the labor market, and, specifically, the idea that payroll growth is slowing because firms cannot find staff they consider suitably qualified for the jobs available. Every indicator of labor demand, with the sole exception of manufacturing-specific surveys, is consistent with very rapid payroll growth, well in excess of 200K per month.

8 August 2017 Will Mexico's Economy Resilience Continue in the Second Half? (My Publications)

The Mexican economy maintained its relatively strong momentum in Q2. The first estimate of Q2 GDP, released last week, confirmed that growth was resilient during the first half of this year, despite the confidence hit caused by domestic and external headwinds.

8 Dec. 2014 - Falling Unemployment Will Trigger Tightening: Payrolls Will Soar (My Publications)

The first thing to ask after a payroll number far from consensus is whether it is supported by other evidence. We are happy to argue that November's blockbuster report is indeed consistent with a range of other numbers, notwithstanding the unfortunate truth that there are no reliable indicators of payrolls on a month-to-month basis.

8 February 2017 German Manufacturing Data Threw a Tantrum in December (My Publications)

German manufacturing data are all over the place at the moment. Earlier this week, data showed that new orders jumped toward the end of 2016, but yesterday's industrial production report was a shocker. Output plunged 3.0% month-to-month in December, pushing the year-over-year rate down to -0.7% from a revised +2.3% in November.

8 Dec. 2015 Small Firms Are Struggling to Recruit, and Price are Nudging Up (My Publications)

The release of the NFIB survey at 6.00AM eastern time this morning--really, they need a new PR advisor--doubtless will bring a flurry of headlines about rising wage pressures, with the expected compensation index rising by a startling three points to a new post-crash high. But this is not news, nor is the high, stable level of hiring intentions; these key labor market numbers were released last week in the NFIB Jobs Report, which appears the day before the official employment report. The data are simply extracted from the main NFIB survey.

7 November. 2016 Wage Gains Will Focus Fed Minds (My Publications)

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.

7 July 2017 Upside Risk for Payroll. Despite Soft ADP. Robust AHE a Decent Bet too (My Publications)

ADP's reported 158K increase in private payrolls was very close to our model-based estimate, so it doesn't change our 220K forecast for todays official payroll number, well above the 177K consensus.

6 Nov. 2015 Markets Ignore Inflation Report's Hawkish Undertones (My Publications)

Markets have interpreted the Monetary Policy Committee's "Super Thursday" releases as an endorsement of their view that interest rates will remain on hold for another year. We think the Committee's communications were more nuanced and believe the door is still open to an interest rate rise in the second quarter of next year.

6 March 2017 Yellen Effectively Promises a March Hike, with Good Reason (My Publications)

Fed Chair Yellen's speech Friday was remarkably blunt: "Indeed, at our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate."

7 April 2017 Mixed Signals for March Payrolls, but 200K Seems a Fair Bet (My Publications)

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.

7 Dec. 2015 After the First Hike, Next Week, Wage Gains Will Set the Pace (My Publications)

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.

7 December. 2016 Durable Goods Orders Plunged Last Month, but the Core is Stabilizing (My Publications)

Unless Boeing received a huge aircraft order on November 30, we can now be pretty sure that most of October's 4.6% leap in headline durable goods orders reversed last month. Through November 29, Boeing booked orders for 34 aircraft, compared to 85 in October. Moreover, the bulk of the orders were for relatively low value 737s, whereas the October numbers were boosted by a surge in orders for 787s, whose list price is about three times higher.

8 July. 2016 Muted Headline Inflation in Mexico, but Core has Hit Banxico's Target (My Publications)

Favourable inflation conditions in Mexico remain in place with June consumer prices increasing just 0.1% month-to-month, unadjusted, better than expected. A modest gain in core prices was largely offset by falling non-core prices, so year-over-year inflation edged down to 2.5% from 2.6% in May.

8 May 2017 Fed Hawks Will Focus More on Unemployment than Wage Gains (My Publications)

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.

9 June 2017 The ECB's World: Accelerating GDP Growth and Lower Inflation (My Publications)

The headline changes in yesterday's ECB policy announcement were largely as expected. The central bank left its main refinancing and deposit rates unchanged at 0.00% and -0.4% respectively, and maintained the pace of QE at €60B per month. The central bank also delivered the two expected changes to its introductory statement. The reference to "lower levels" was removed from the forward guidance on rates, signalling that the ECB does not expect that rates will be lowered anytime soon.

9 June 2017 Bank C&I Lending has Levelled-off, Expect a Second-Half Rebound (My Publications)

The rollover in bank lending to commercial and industrial companies probably is over. On the face of it, the slowdown has been alarming, with year-over-year growth in the stock of lending slowing to just 2.6% in April, from a sustained peak of more than 10% in the early part of last year.

9 Mar. 2015 Surging Job Gains, and Sub-Nairu Unemployment to Force June Hike (My Publications)

In the wake of the February employment report, the implied probability of a June rate hike, measured by the fed funds future, jumped to 89% from 71%. The market now shows the chance of a funds rate at 75bp by the end of the year at just over 60%. That still looks low to us, but it is a big change and we very much doubt it represents the end of the shift in expectations.

9 Nov. 2015 Fed Set to Hike in December, and then Faster than Markets Expect (My Publications)

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.

9 Nov. 2015 The Unemployment Rate Is the Key Measure of Labour Market Slack (My Publications)

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.

9 Feb. 2015 Only Brazil Will Have to Hike, Other LatAm Central Banks On Hold (My Publications)

Last week's data supported our view that monetary policy across LatAm will continue to diverge in the short term. Brazil will have to prolong its monetary tightening cycle, while economies such as Colombia and Chile will remain on hold despite the recent slowdowns in their economic cycle.

9 Feb. 2015 Labor Data Forcing the Fed Into a Corner - (My Publications)

It's always easy to find reasons to doubt single monthly observations of any economic time series, but our first chart makes it very clear that the labor market has strengthened markedly over the past few months. The underlying trend rate of growth in private payrolls is now above 300K for the first time in exactly 20 years, and we seen no reason to expect much change over the next few months.

8 November. 2016 If Clinton Loses, Most U.S. Forecasting Models Will be Wrong (My Publications)

We are not political analysts or psephologists, but we note that each of the nine separate election forecasting models tracked by the New York Times suggests that Hillary Clinton will be president, with odds ranging from 67% to greater than 99%.

8 May 2017 Inflation Report Likely to Reaffirm Slim Chances of a 2017 Rate Hike (My Publications)

This week's MPC meeting and Inflation Report likely will support the dominant view in markets that the chances of a 2017 rate hike are remote, even though inflation will rise further above the 2% target over the coming months. Overnight index swap markets currently are pricing-in only a 20% chance of an increase in Bank Rate this year.

9 August 2017 Productivity Growth Might be Turning up, Labor Costs Subdued (My Publications)

We are a bit more optimistic than the consensus on the question of second quarter productivity growth, but the data are so unreliable and erratic that the difference between our 1.2% forecast and the 0.7% consensus estimate doesn't mean much.

9 August. 2016 Further Evidence of Divergence in the Andean Economies (My Publications)

Colombia's economy has continued to slow, due mainly to lagged effect of the oil price shock since mid-2014, and stubbornly high inflation, which has triggered painful monetary tightening. Modest fiscal expansion and capital inflows have helped to avoid a hard landing, but the economy is still feeling the pain of weakening domestic demand. And the twin deficits--though improving--remain a threat.

9 Dec. 2014 - NFIB Says Wage Pressure is Rising: ECI Data Seem to Agree (My Publications)

We argued in the Monitor yesterday that the NFIB survey's hiring intentions number is the best guide to the trend in payroll growth a few months ahead. But today's November NFIB report will bring no new information on job growth because the key labor market elements of the survey have already been released.

6 March 2017 PMIs Signal Stronger EZ Growth, but Will the Hard Data Follow? (My Publications)

Survey data continue to suggest that GDP growth will accelerate in Q1. The final PMI reports on Friday showed that the headline EZ composite index rose to 56.0 in February, from 54.4 in January, in line with the first estimate.

6 Mar. 2015 Decent But Unspectacular Job Gains in February? (My Publications)

Our base forecast for today's February payroll number is an unspectacular 220K, though if you twist our arms we'd probably say that we'd be less surprised by a big overshoot to this estimate than an undershoot. The single biggest argument against a big print today is simply that February payrolls have initially been under-reported in each of the past five years and then revised higher.

4 January 2017 Surging EZ Inflation will Comfortably Beat the Consensus Today (My Publications)

German inflation surged in December, pointing to an upside surprise in today's advance EZ report. The headline inflation rate rose to a three-year high of 1.7% year-over-year in December, from 0.8% in November. This was the biggest increase in the year- over-year rate since 1993.

4 Dec. 2015 November Labor Data Will Support Yellen's Case for Hiking (My Publications)

We're expecting to see November payrolls up by about 200K this morning, but our forecast takes into account the likelihood that the initial reading will be revised up. In the five years through 2014, the first estimate of November payrolls was revised up by an average of 73K by the time o f the third estimate. Our forecast for today, therefore, is consistent with our view that the underlying trend in payrolls is 250K-plus. That's the message of the very low level of jobless claims, and the strength of all surveys of hiring, with the exception of the depressed ISM manufacturing employment index. Manufacturing accounts for only 9% of payrolls, though, so this just doesn't matter.

4 May 2017 Strong Q1 GDP Data in the EZ, but the Annualised Trend is not 2% (My Publications)

The Eurozone enjoyed a strong start to 2017. Yesterday's advance data showed that real GDP rose 0.5% quarter-on-quarter in Q1, a similar pace to Q4, which was revised up by 0.1 percentage points. The year-over-year rate dipped to 1.7%, from an upwardly revised 1.8% in Q4.

4 November. 2016 October Payrolls Likely Were Good Enough (My Publications)

For analysts with a broadly positive view of the U.S. economy, it is tempting to argue that the slowdown in payroll growth this year reflects supply constraints, as the pool of qualified labor dries up.

4 Sept. 2015 Downside Risks for August Payrolls, but the Trend is Solid (My Publications)

We have no reason to think the underlying trend in payroll growth has changed--the 235K average for the past three months is as good a guide as any--but the balance of risks points clearly to a rather lower print for August. Two specific factors, neither of which have any bearing on the trend, are likely to have a significant influence on the numbers, and both will work to push the number below the 217K consensus.

4 Apr. 2016 While We Were Out... (My Publications)

The March employment report didn't tell us what we really want to know. The underlying trend in wage growth remains obscured by the calendar quirk which depresses reported hourly earnings when the 15th of the month--pay day for people paid semi-monthly -- falls after the payroll survey week.

31 May 2017 Eurozone Core Inflation Likely will Undershoot the Consensus Today (My Publications)

Today's advance EZ CPI report likely will show that inflation pressures eased in May. We think inflation slipped to 1.5% year-over-year, from 1.9% in April, as the boost to the core rate from the late Easter faded.

30 Sept. 2015 Mexico's Labor Market Reflects Its Upbeat Domestic Story (My Publications)

Mexico's data over the last few weeks have confirmed our view that private consumption remains the key driver of the current economic cycle. Solid economic fundamentals, thanks to stimulative monetary policy and structural reforms, have supported the domestic economy in recent quarters. Falling inflation has also been a key driver, slowing to 2.5% by mid-September, a record low, from an average of 4% during 2014.

30 Oct. 2015 The Third Quarter ECI is Set to Rebound, but How Far? (My Publications)

We have been asked by a few readers how much confidence we have in our forecast of a 1% rebound in the third quarter employment costs index, well above the 0.6% consensus and the mere 0.2% second quarter gain. The answer, unfortunately, is not much, though we do think that the balance of risks to the consensus is to the upside.

31 January 2017 Will Faster Wage Growth Finally Trigger An Acceleration in the ECI? (My Publications)

The headline employment cost index has been remarkably dull recently, with three straight 0.6% quarterly increases. The consensus forecast for today's report, for the three months to December, is for the same again.

31 July 2017 How Tight Can Japan's Labour Market go? (My Publications)

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.

31 July 2017 The Inflation Report Likely Won't Boost 2017 Rate Hike Odds (My Publications)

The pullback in CPI inflation in June and continued slow GDP growth in Q2 mean that the MPC almost certainly will keep Bank Rate at 0.25% on Thursday.

4 September 2017 Recovery will Continue in H2, but Fiscal Reforms are Key (My Publications)

Brazil's economy likely will bounce back during the second half of this year and into 2018, after the second quarter was marred by political risk.

20 Jan. 2016 Wage Growth Will Push the "Data Driven" Governor to Hike this Year (My Publications)

Bank Governor Mark Carney reiterated in a speech yesterday that he wants to see sustained momentum in GDP growth, domestic cost pressures firm and core inflation rise further towards 2%, before raising interest rates. We doubt he will have long to wait on the last two points, given the tightness of the labour market.

6 February 2017 Soft January Hourly Earnings Will Prove Short-Lived (My Publications)

Markets over-reacted to the much smaller-than-expected 0.1% increase in January hourly earnings, in our view. We don't have a full explanation for the shortfall against our 0.5% forecast, but that doesn't make it wise to throw out the baby with the bathwater, making the de facto assumption that wage growth now won't accelerate in the future.

6 Feb. 2015 Payroll Growth Trending at 250K-plus - Expect Strength Today (My Publications)

The odds favor a robust January payroll report today. The key leading indicator--the NIFB hiring intentions index from five months ago--points to a 275K increase, while the coincident NFIB actual employment change index suggests 260K.

6 July 2017 Chinese Service Sector Downtrend to Continue into the Second Half (My Publications)

China's service sector slowed again in June, with the Caixin PMI falling to 51.6 from 52.8 in May. The Q2 average of 52.0 was only minimally lower than the 52.6 in Q1.

6 July. 2015 Labor Market is Still Tightening, Despite June Payroll Miss (My Publications)

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.

6 June. 2016 Mr. Temer Begins Brazil's Fiscal Overhaul, Despite Political Unrest (My Publications)

Brazil's interim government has been trying to put the kibosh on the vicious circle of recession, capital outflows, and political pandering that has dogged the country for so long. In his first few weeks at the helm, despite the political turmoil, Mr. Temer has started to tackle Brazil's fiscal mess, the country's biggest headache.

6 Feb. 2015 Chilean Growth Is Improving, But China's Slowdown Is A Worry (My Publications)

Chilean GDP growth hit bottom in August, but activity is now picking up and will gather speed over the coming quarters. The tailwinds from lower oil prices and fiscal stimulus will soon be visible in the activity data.

5 September 2017 Underlying Trend in Labor Data Unaffected by "Soft" August Report (My Publications)

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.

5 June 2017 Politics at Centre-Stage in Mexico, Volatility Likely Will Ease, for now (My Publications)

Investors in Mexico likely will focus early this week on yesterday's gubernatorial election results in Nayarit, Coahuila and the State of Mexico. The latter is especially important, because it is viewed as a possible guide to the 2018 presidential election.

5 July. 2016 Can We be Sure The Labor Market is Tight Enough to Boost Wage Gains? (My Publications)

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.

5 June 2017 The Election Race is Still Tightening, Setting up Sterling for More Volatility (My Publications)

The Conservatives' opinion poll lead continued to decline over the last week, suggesting that a landslide victory on Thursday no longer is likely. Indeed, the Tories' average lead over Labour in the 10 most recent opinion polls has fallen to just 6%, down from a peak of nearly 20% a month ago.

5 May 2017 Payrolls Should Rebound to More than 200K, Wage Gains up too? (My Publications)

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.

5 Nov. 2015 More MPC Hawks Likely to Emerge Today, Despite Services Slowdown (My Publications)

The improvement in the Markit/CIPS services PMI in October was pretty limp, supporting our view here that the recovery is shifting into a lower gear. What's more, the poor productivity performance implied by the latest PMIs indicates that wage growth will fuel inflation soon. As a result, the Monetary Policy Committee--MPC--won't be able to wait long next year before raising interest rates. Indeed, we expect the minutes of this month's meeting, released today, to show that one more member of the nine-person MPC has joined Ian McCafferty in voting to hike rates.

30 Oct. 2015 Deflation is Yesterday's Story - Get Ready for Higher Inflation (My Publications)

Advance data from Germany and Spain indicate that Eurozone inflation rebounded in October. We think inflation rose to 0.2% year-over-year from -0.2%, and German data suggest the main boost will come from both core and food inflation. Inflation in Germany rose to 0.3% year-over-year from 0.0% in September, lifted by an increase in inflation of leisure and entertainment, hotels and durable goods. Food inflation also rose to 1.6% from 1.1% in September, due to surging prices for fresh fruit and vegetables.

19 Oct. 2015 Real Wage Gains Signal the True Tightness of the Labor Market (My Publications)

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.

12 June 2017 China's Policy Choices are all Difficult, can Disaster be Averted? (My Publications)

China faces three possible macro outcomes over the next few years. First, the economy could pull off an active transition to consumer-led growth. Second, it could gradually slide into Japan-style growth and inflation, with government debt spiralling up. Third, it could face a full blown debt crisis, where the authorities lose control and China drags the global economy down too

12 June 2017 Can Core PCE Inflation Overtake Core CPI Inflation? (My Publications)

For the past six years, the PCE measure of core inflation has undershot the CPI version. The average spread between the two year-over-year rates since January 2011 has been 0.3 percentage points, and as far as we can tell most observers expect it to be little changed for the foreseeable future.

12 Nov. 2015 German Inflation Will Rise Faster than the ECB and Market Expect (My Publications)

CPI data today in France and Germany will confirm that current inflation rates remain very low in the euro area. Inflation in Germany likely rose to 0.3% year-over-year from 0.0% in September, in line with the consensus and initial estimate. State data indicate that the rise was driven by surging fresh food prices and slightly higher services inflation, principally due to a jump in the volatile recreation and culture sector. Looking ahead, food prices will drop back, but energy inflation will rise rapidly as last year's plunge drops out of the year-over-year comparison, while upward core pressure is now emerging too.

12 Nov. 2015 Slight Weakening in Wage Growth Won't Delay the MPC (My Publications)

Markets were right to conclude that September's slightly weaker average weekly wage figures will have little impact on the MPC's decision on when to raise official interest rates. Fundamentally, wage pressures are building and likely will contribute to pushing CPI inflation back to its 2% target towards the end of 2016.

12 September 2017 NFIB Labor Indicators Still Very Strong, Despite August Dips (My Publications)

The key labor market numbers from the monthly NFIB survey of small businesses are released ahead of the main report, due today.

12 July 2017 Yellen Will Re-affirm Fed Policy. Expect no Revelations, or Dates (My Publications)

Chair Yellen has become quite good at not giving much away at her semi-annual Monetary Policy Testimony.

12 July 2017 Wage Growth Likely will Remain too "Anaemic" for the Governor this Year (My Publications)

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.

11 October. 2016 Unemployment has Stopped Falling, For Now (My Publications)

The single most startling development in the labor market data in recent months is acceleration in labor force growth. The participation rate has risen only marginally, because employment has continued to climb too, but the absolute size of the labor force is now expanding at its fastest pace in nine years, up 1.9% in the year to September.

11 September 2017 China's Trade Surplus Edges Lower with net Trade Contributing Little (My Publications)

Chinese exports grew by just 5.5% in dollar terms year-over-year in August, down from 7.2% in July. Export growth continues to trend down, with a rise of just 0.2% in RMB terms in the three months to August compared to the previous three months, significantly slower than the 4.8% jump at the p eak in January.

12 Feb. 2016 Collapse in Equity Prices Still Not a Convincing Signal of Recession (My Publications)

The downturn in equity prices deepened yesterday, with the FTSE 100 index closing at 5,537, 22% below its April 2015 peak. We remain unconvinced, however, that financial market turmoil is set to push the U.K. economy into a recession. We continue to take comfort from the weakness of the past relationship between equity prices and economic activity.

12 Jan. 2015 - Unemployment Plunging Towards the Nairu - What Will the Fed Do? (My Publications)

The strength in payrolls in recent months is real. The three-month moving average increase in private payrolls now stands at 280K, despite adverse seasonal adjustments totalling 91K in the fourth quarter, compared to the same period last year.

13 April 2017 Slowing Labour Income Growth Highlights Consumers' Woes (My Publications)

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.

13 December. 2016 Today's NFIB Labor Data are not New, but they are Important (My Publications)

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.

13 September 2017 Labour Market Report to Show no Easing of the Real Wage Squeeze (My Publications)

Today's labour market report likely will show that employment continued to grow briskly over the summer, but that wage gains still are lagging well behind inflation.

13 Nov. 2015 Will the Drag on the Recovery From Construction Fade? (My Publications)

The underlying health of the construction sector isn't as poor as today's official output figures likely will imply. Nonetheless, growth in construction output, which accounts for 6% of GDP, probably won't return to the stellar rates seen in 2013 and 2014, and the sector can't be relied upon to provide much support to overall growth.

14 Dec. 2015 November Data Will Mark the First Step in Inflation's Long March Up (My Publications)

November's consumer prices figures, released tomorrow, look set to show that the U.K.'s spell of negative inflation has ended. CPI inflation is set to pick-up decisively over the coming months, even if oil prices continue to drift down. In fact, fuel prices likely will contribute to the pick-up in inflation from October's -0.1% rate. November's 1.5% fall in prices at the pump was smaller than the 2.3% drop in the same month last year, so the year-over-year rate will rise. Fuel's contribution to CPI inflation therefore will pick up, albeit very marginally, to -0.47pp from -0.50pp in October.

14 Jan. 2016 Inflation Outlook Still Could Push MPC to Hike Before the Summer (My Publications)

Markets' judgement that the Monetary Policy Committee--which meets today--will wait until 2017 to raise interest rates overestimates the role that the drop in oil prices and slower GDP growth will play in its decision-making. The inflation risks emanating from the increasingly tight labour market still could motivate a tightening before the summer.

14 July. 2016 Faster Pay Gains for Job-Switchers Forcing Employers to Pay More (My Publications)

The details of the substantial pay raises being offered to some 18K JP Morgan employees over the next three years are much less important than the signal sent by the company's response to the tightening labor market. In an economy with 144M people on payrolls, hefty raises for JP Morgan employees won't move the needle in the hourly earnings data.

13 March 2017 Will the Labor Data Push the Fed to Hike Again in June? (My Publications)

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.

13 Mar. 2015 Q1 GDP outlook is still decent, despite poor Industrial Production (My Publications)

Industrial production in the Eurozone fell a disappointing 0.1% month-on-month in January, driven by low output in Italy and Germany, as well as a large drop in Finland. But December production was revised up to 0.3% month-to-month, from the initially estimated 0.0%.

13 February 2017 What Would it Take to Persuade the Fed to Hike in March? (My Publications)

Our argument that rates could rise as soon as March has always been contingent on two factors, namely, robust labor market data and a degree of clarity on the extent of fiscal easing likely to emerge from Congress. On the first of these issues, the latest evidence is mixed.

13 Jan. 2015 - Small Business Sector on the Brink of Normalization (My Publications)

Within the next few month, and perhaps as soon as next month, the gap between the headline NFIB and ISM manufacturing indexes, shown in our first chart, will close for the first time since late 2008.

20 Jan. 2015 - Wage Gains Will be Slowed by Low CPI Inflation, but Not by Much (My Publications)

We have been hearing a good deal recently about the risk that the plunge in headline inflation will feed back into the labor market, keeping the pace of wage gains lower than they would otherwise have been and, therefore, slowing the pace of Fed tightening.

13 July. 2016 Grim Retail Sales in Brazil Highlight the Painful Stabilization Process (My Publications)

Evidence that Brazil's consumption recession has hit bottom seemed to vanish yesterday with the May retail sales report. Sales plunged 1.0% month-to-month, pushing the year-over-rate down to a terrible-looking -9.0%, from a revised -6.9% in April. Adding insult to injury, the month-to-month number for April was revised down by 0.2 percentage points.

11 Feb. 2016 Markets Still Underestimate the Looming Pick-Up in Inflation (My Publications)

Markets' inflation expectations have fallen in recent weeks, maintaining the trend seen over the previous 18 months. The fall in expectations for the next year or so is justified by the sharp fall in oil prices. But expectations for inflation further ahead have drifted down too, even though lower oil prices will have no effect on the annual comparison of prices beyond a year or so from now.

11 Feb. 2015 Soaring Job Openings Suggest Super-Easy Money is Now Risky (My Publications)

Back in April 2012, Janet Yellen--then Fed Vice-Chair--spoke in detail about the labor market and monetary policy. The key point of her labor market analysis was that it was impossible to know for sure how much of the increase in unemployment--at the time, the headline rate was 8.2%--was structural, and how much was cyclical.

1 Dec. 2014 Fed Set to Respond As Unemployment Hits Nairu (My Publications)

It has become fashionable to argue that the combination of favorable yield differentials and abundant global liquidity, courtesy of the BoJ and the ECB, will keep Treasury yields very low for the foreseeable future; the 10-year could even establish itself below 2%.

1 Apr. 2015 Tightening Bias Remains as Chile's Inflation Forecast is Increased (My Publications)

Chile's economic sector survey, released on Monday, provides further evidence that the cyclical recovery in the economy continues, albeit at a moderate pace. On the demand side, the rebound is still in place, with retail sales jumping 2.0% month-to-month in February and the underlying trend firm.

1 December. 2016 Higher EZ Inflation Won't Prevent the ECB from Extending QE (My Publications)

Inflation in the Eurozone rose modestly last month. Yesterday's advance CPI report showed the headline rate rising to 0.6% year-over-year in November, from 0.5% in October, mainly because of a jump in fresh food inflation. Energy prices fell 1.1% year-over-year, slightly more than the 0.9% decline in October, but we expect a sharp increase over the next six months.

1 June 2017 Dovish EZ CPI Data Take the Sting out of Next Week's ECB Meeting (My Publications)

Yesterday's advance EZ CPI report bolstered the ECB doves' case for only marginal adjustments to the language on forward guidance at next week's meeting. Inflation in the euro area fell to 1.4% in May, from 1.9% in April, constrained by almost all the key components.

1 November. 2016 The Recovery in Mexico is Solid, Hampered By Weak Mining (My Publications)

Mexico's economy grew 1.0% quarter-on-quarter in Q3, the fastest pace since 2014, following a 0.2% contraction in Q2, according to the preliminary report published yesterday.

09 Feb. 2016 NFIB Survey Components are More Important than the Headline (My Publications)

The headline number in today's NFIB survey of small businesses probably will look soft. The index is sensitive to the swings in the stock market and we'd be surprised to see no response to the volatility of recent weeks. We also know already that the hiring intentions number dropped by four points, reversing December's gain, because the key labor market numbers are released in advance, the day before the official payroll report.

08 Feb. 2016 Complacency Rife About Boost to Prices From National Living Wage (My Publications)

The Chancellor announced to great fanfare last July that a new National Living Wage-- NLW--would be introduced in April 2016 at 7.5% above the existing legal minimum for most workers. Companies can and will take a variety of actions to mitigate the impact on their costs.

03 Feb. 2016 Stan Fischer Wants Steady 3% Wage Gains - Good Luck (My Publications)

Stanley Fischer said something interesting and potentially very revealing in the Q&A following his speech Tuesday afternoon at the Council on Foreign Relations. The Fed Vice-Chair argued that wage increases of 3% are "where people would like to be", meaning, presumably, that he believes sustained wage gains at this pace are consistent with the Fed's 2% medium-term inflation forecast.

03 October. 2016 First Signs of Recovery in Brazilian Private Consumption? (My Publications)

Brazil's recession has been severe, triggered by the downturn in the commodity cycle, which revealed the underlying structural weaknesses in the economy. This set off an acute shock in domestic demand, but it has bottomed in recent months and we now expect a gradual recovery to emerge.

05 Feb. 2016 Downside Jobs Risk as Seasonals, Weather Effects Combine (My Publications)

We are pretty bullish about the prospects for the economy this year, but we try not to let our core view interfere with our take on the individual indicators. And our analysis suggests that the odds strongly favor a "disappointing" headline payroll number today; we have revised down our forecast to 160K from our previous 175K estimate.

07 May. 2015 How Far Will Yields Rise When the Activity Data Turn Higher? (My Publications)

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.

10 August. 2015 While We Were Out... (My Publications)

...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.

10 August. 2016 When Rates are Close to Zero, Behavior Changes (My Publications)

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.

10 November. 2016 How Far Will Trump Loosen Fiscal Policy? And How Will the Fed React? (My Publications)

Note: This updates our initial post-election thoughts, adding more detail to the fiscal policy discussion. Apologies for the density of the text, but there's a lot to say. Our core conclusions have not changed since the election result emerged. The biggest single economic policy change, by far, will be on the fiscal front.

10 Sept. 2015 Soaring Job Openings Signal Further Labor Market Tightening (My Publications)

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.

10 Sept. 2015 Wage Cuts Pay off as Periphery Leads EZ Employment Higher (My Publications)

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.

11 Feb. 2015 Chile's Outlook Improving Slowly - Oil Price are a Clear Tailwind (My Publications)

The resilience and adaptability that the Chilean economy has shown over previous cycles has been tested repeatedly over the last year. Uncertainty on the political front, falling metal prices, and growing concerns about growth in China have been the key factors behind expectations of slowing GDP growth.

10 May 2017 April's Surge in Retail Sales Isn't a Turning Point (My Publications)

April's Retail Sales Monitor from the British Chambers of Commerce, released yesterday, provided a powerful signal that households' spending rebounded in April, following a terrible Q1.

10 Mar. 2016 Wage Growth Poised to Revive, Regardless of Immigration (My Publications)

Amid the intensifying debate about the pros and cons of E.U. membership, higher immigration from the rest of Europe often is blamed for the disappointing weakness of wage growth over the last couple of years. But we see little evidence to support that hypothesis.

10 Feb. 2016 Yellen to Sound Cautious Today, but Can't Ignore the Labor Market (My Publications)

Fed Chair Yellen today needs to strike a balance between addressing investors' concerns over the state of the stock market and the risks posed by slower growth in Asia, and the tightening domestic labor market.

10 July 2017 Jobs Gains to Push Unemployment Below 4%, the Fed will Hike Further (My Publications)

The gratifyingly strong 222K headline June payroll gain, if repeated through the second half of the year, will put unemployment below 4% by December.

10 July 2017 PBoC and BoJ Choose Divergent Paths in the Second Half (My Publications)

The two major central banks of Asia have chosen hugely divergent policies. The BoJ has chosen to fix interest rates, while the PBoC appears set on preventing a meaningful depreciation of the currency.

10 Mar. 2015 Can the Uptick in New Home Sales be Sustained? (My Publications)

The key labor market numbers from today's February NFIB report on small businesses--hiring intentions and the proportion of firms with unfilled job openings--were released last week, as usual, ahead of the official jobs report.

14 November. 2016 Higher EZ Inflation and Bond Yields: Story Changing? (My Publications)

Friday's detailed October CPI report in Germany confirmed that inflation pressures are steadily rising. Inflation rose to 0.8% year-over-year in October, from 0.7% in September, lifted mostly by a continuing increase in energy prices.

13 July 2017 Don't Extrapolate from May's Uptick in Basic Wage Growth (My Publications)

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.

18 September 2017 How it Could all go Wrong for U.S. Markets, and Quickly (My Publications)

For the record, we think the Fed should raise rates in December, given the long lags in monetary policy and the clear strength in the economy, especially the labor market, evident in the pre-hurricane data.

18 October. 2016 Headline Inflation is Set to Soar, Rendezvous With Core Next Spring (My Publications)

In September last year, headline CPI inflation stood at exactly zero. Today, we expect to see a 1.5% print, thanks mostly to the fading impact of falling energy prices.

15 August 2017 China's Boomlet Causes Volatility for Japan, Second Half to Weaken (My Publications)

Japanese real Q2 GDP growth surprised analysts, increasing sharply to a quarterly annualised rate of 4.0%, up from 1.0% in Q1 and much higher than the consensus, 2.5%. But its no coincidence that the jump in Japanese growth follows strong growth in China in Q1.

19 April 2017 Another Political Hand Grenade is Thrown in European Politics (My Publications)

Economic news in Europe continues to take a back-seat to volatility in politics. Yesterday's announcement by U.K. Prime Minister Theresa May that she is seeking a snap general election on June 8th cast further doubt over what exactly Brexit will look like.

19 Jan. 2016 Market Chaos in January Does Not Drive Fed Actions All Year (My Publications)

To paraphrase recent correspondence: "How can you possibly believe, given the terrible run of economic data and the turmoil in the markets, that the Fed will raise rates in March/June/at all this year?" Well, to state the obvious, if markets are in anything like their current state at the time of the eight Fed meetings this year, they won't hike. That sort of sustained downward pressure and volatility would itself prevent action at the next couple of meetings, as did the turmoil last summer when the Fed met in September. And if markets were to remain in disarray for an extended period we'd expect significant feedback into the real economy, reducing--perhaps even removing--the need for further tightening.

18 Nov. 2015 Weak Producer Price Inflation Won't Prevent CPI Rebound (My Publications)

CPI inflation held steady at -0.1% in October, matching its lowest rate since March 1960. We had expected the rate to tick down to -0.2%, but the rebound in clothing inflation in October, following a period of discounting in September, was larger than we had anticipated. Looking ahead, we can be fairly confident that CPI inflation will pic k up sharply over the coming months.

18 May. Falling Airline Fares Mask Higher Services Sector Inflation (My Publications)

CPI inflation surprised to the downside in April, falling to 0.3% from 0.5% in March. Both the consensus and ourselves expected the rate to hold steady. Nearly all of the surprise, however, was in airfares and clothing inflation, which were depressed, to a greater extent than we anticipated, by the shift in the timing of Easter and bad weather, respectively.

18 July 2017 Colombia's Economic Prospects Remain Poor, but they will Improve (My Publications)

May's activity data underline the weakness of Colombia's economic growth. Domestic demand still is under pressure due to the lagged effect of the deterioration in the terms of trade and other temporary shocks in 2016, and the VAT increase in January this year.

18 July 2017 The Conundrum of Germany's Huge Current Account Surplus (My Publications)

No subject in the EZ economy is a source of more dispute than Germany's ballooning current account surplus. The Economist recently identified he German surplus as a problem for the world economy.

18 July. 2016 Core Inflation is Grinding Slowly Higher, but Bigger Risks Ahead (My Publications)

Trouble is brewing in the core inflation data, despite the benign-looking 0.17% increase in the June report, released Friday. If you annualize that rate indefinitely, core inflation will reach a steady state of 2.1%, so the Fed never needs to raise rates. Alas this only makes sense if you think that single monthly CPI numbers tell the whole truth, and that the fundamental forces acting on inflation are stable. Neither of these propositions is remotely true.

18 May 2017 Will Strong Employment Growth Be Sustained? (My Publications)

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.

19 January 2017 Core Inflation Pressure Building Slowly, Headline to Jump Further (My Publications)

The solid numbers for December mean that core inflation remains on track to breach 2?-?% this year, though probably not until the summer. Over the next few months, base effects will help to hold the core rate close to the December pace.

19 June 2017 Colombia's Economy Started Q2 Poorly, Expect a Sluggish Recovery (My Publications)

Evidence of slowing economic activity in Colombia continues to mount. Retail sales fell 2.0% year- over-rate in April, down from a revised plus 3.0% in March; and the underlying trend is falling. This year's consumption tax increase, low confidence, tight credit conditions, and rising unemployment continue to put private consumption under pressure.

2 March 2017 Is it all over for Mr. Fillon? (My Publications)

The French presidential election campaign remains chaotic. Republican candidate François Fillon had to defend himself again yesterday as investigations into his potential misuse of public funds deepened. Mr. Fillon and his wife have now been summoned to court to explain themselves. Markets expected Mr. Fillon to resign as the Republican front-runner. Instead, he used his unscheduled media address to defiantly declare that he is staying in the race.

2 June. 2015 Higher Inflation is the Next Big Macroeconomic Story in the EZ (My Publications)

Inflation pressures are slowly, but surely, rising in the Eurozone. Advance data indicate that inflation in Germany rose to 0.7% year-over-year in May, up from 0.5% in April. Reduced drag from the non-core components is the main driver, with energy prices rebounding, and food prices now rising steadily at 1.4% year-over-year.

2 May 2017 Can Sterling's Recovery Gather More Momentum? (My Publications)

Sterling continued to recover last week, hitting its highest level against the dollar since October, despite a series of data releases indicating that the economy is losing momentum. Indeed, sterling was unscathed by the news on Friday that quarter-on-quarter GDP growth slowed to just 0.3% in Q1, from 0.7% in Q4.

2 Oct. 2015 Expect Decent September Payrolls, But Sluggish Wage Gains (My Publications)

Whatever you think is the underlying tr end in payroll growth, you probably should expect a modest undershoot in today's report, thanks to the persistent tendency for the first estimate of September payrolls to undershoot and then be revised higher. The good news is that the initial September error tends not to be as big as in August--the median revision from the first estimate to the third over the past six years has been 49K, compared to 66K--and it has declined recently. Over the past three years, September revisions have ranged from only 18K to 27K. Still, we can't ignore six straight years of initial undershoots.

20 Apr. Wage Growth is Picking Up, Pressuring the MPC to Act (My Publications)

Today's labour market figures likely will show that wage growth is bouncing back from a soft patch in late 2015. As a result, the MPC won't be able to sit on its hands much longer, especially in light of the continued dire news on productivity.

2 June 2017 May Payrolls Likely Solid, but Calendar Quirk will hit Wage Data (My Publications)

The 253K increase in May private payrolls reported by ADP yesterday was some a bit stronger than our 225K forecast. Plugging the difference between these numbers into our payroll model generates our 210K forecast for today's official number.

2 February 2017 Rising Inflation Expectations to Yield Hawkish Talk from the MPC Today (My Publications)

Expectations are running high that the MPC will strike a more hawkish tone today in the minutes of this month's meeting and in the quarterly Inflation Report. Investors are pricing in a 45% chance of the MPC raising interest rates before the end of 2017, up from 30% before the last Report in November.

19 May 2017 Expect a Hike on June 14 Unless Financial Conditions Tighten, a Lot (My Publications)

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.

19 September 2017 Four Reasons Why the MPC Likely Will Procrastinate in November (My Publications)

For the record, we think the Fed should raise rates in December, given the long lags in monetary policy and the clear strength in the economy, especially the labor market, evident in the pre-hurricane data.

2 August 2017 Inflation to Erode Chinese Demand in the Second Half (My Publications)

The Caixin manufacturing PMI rebounded to 51.1 in July from 50.4 in June, soundly beating the consensus for no change. The PMIs are seasonally adjusted but the data are much less volatile on our adjustment model. On our adjustment, the headline has averaged 50.9 so far this year, modestly higher than in the second half of last year.

2 Dec. 2015 Plunging German Unemployment Will Challenge the ECB Next Year (My Publications)

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.

18 August 2017 Sluggish Income Growth has Held Back Consumption, that will Change (My Publications)

Consumer confidence surveys have risen since the elections to levels consistent with very rapid growth in real spending.

18 September 2017 How Severely Would a Rate Hike Slow the Economy? (My Publications)

The MPC took an unprecedented step last week to pave the way for an interest rate rise.

15 June. 2016 Good Start to Q2 for Brazil's Retail Sales, but Details Are Less Upbeat (My Publications)

Brazil's retail sales improved at the start of the second quarter, increasing 0.5% month-to-month in April, partially reversing the 0.9% contraction in March. But the details were less upbeat than the headline.

15 June 2017 Yellen to Markets: Core Inflation is Noisy, the Labor Market is the Key (My Publications)

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.

15 March 2017 Low Mortgage Arrears Hide Rising Risks as the Economy Slows (My Publications)

The slowdown in households' income growth since the referendum has not pushed up mortgage default rates, so far. Employment grew by just 0.2% quarter-on-quarter in Q3 and 0.1% in Q4, well below the 0.5% average rate seen in the three years before the referendum.

15 May 2017 The Jump in Q1 German GDP Growth Likely Overstates the Trend (My Publications)

The German economy fired on all cylinders at the beginning of the year. Advance data on Friday showed that real GDP rose 0.6% quarter-on-quarter, accelerating from a 0.4% increase in Q4.

15 November. 2016 Inflation Likely Stable in October, but Upward Trend Remains Strong (My Publications)

We expect today's consumer price figures to show that CPI inflation remained at 1.0% in October, after jumping in September from 0.6% in August.

15 June 2017 The MPC's Minutes Will Sound Balanced, Despite Surging Inflation (My Publications)

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.

15 Jan. 2016 Don't Believe Everything You See in Germany's GDP Data (My Publications)

Yesterday's preliminary full-year GDP data in Germany tell a cautionary tale of the dangers in taking national accounts at face value. The headline data suggest real GDP growth rose to 1.7% in 2015, up slightly from 1.6% in 2014, but these data are not adjusted for calendar effects. The working-day adjusted measure buried in the press release instead indicates that growth slowed marginally to 1.5% from 1.6% in 2014.

15 Dec. 2014 - U.S. Approaching the Monetary Policy Crossing Point (My Publications)

All policymaking is about trade-offs; very few government decisions confer only benefits. Someone, or more likely some group, loses. Monetary policy is no exception to the trade-off rule.

15 Dec. 2015 Dip in Wage Growth Hasn't Lessened the Pressure on the MPC (My Publications)

Investors kicked expectations for the first rise in official interest rates even further into the future when last month's labour market data, revealing a sharp fall in wage growth, were released. But a closer look at the official figures reveals that labour cost pressures have remained robust, cautioning against making a snap reaction if even weaker wage data are released on Wednesday.

18 August 2017 Japan's Trade Surplus Bounced. Exports to U.S. Strengthen (My Publications)

Japan's July adjusted trade surplus rebounded to ¥337.4B from ¥87.3B in June, far above consensus. On our seasonal adjustment, the rebound is slightly smaller but only because we saw less of a drop in June.

15 February 2017 Poor Brazilian Retail Sales don't Change the Improving Trend (My Publications)

Brazil's consumer spending data yesterday appeared downbeat. Retail sales fell 2.1% month-to-month in December, pushing the year-over-year rate down to 4.9%, from -3.8% in November. This is a poor looking headline, but volatility is normal in these data at this time of the year, and the underlying trend is improving.

15 Oct. 2015 Headline Inflation to Slip Below Zero, but Not For Long (My Publications)

The headline CPI inflation rate almost certainly dipped below zero in September, barring a startling and deeply improbable surge in the core. We look for a 0.4% month-to-month headline drop, driven by an 11% plunge in gasoline prices, pushing the year-over-year rate to -0.3%. This is of no real economic significance, not least because hugely unfavorable base effects mean the year-over-year rate almost certainly will rise sharply over the next few months, reaching about 1¾% as soon as January.

15 December 2016 October's Surprising Labor Data Will Make the MPC Think, not Act (My Publications)

The Bank of England won't set markets alight today. We expect another 9-0 vote to leave rates unchanged at 0.25%, and to continue with the £50B of gilt purchases and $10B of corporate bond purchases announced in August. This is not to say, though, that everything is plain sailing for the Monetary Policy Committee.

17 Dec. 2015 The Beginning of "Gradual" or the Start of the Next Big Fed Mistake? (My Publications)

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.

17 May 2017 CPI Inflation Still has Further to Climb this Year (My Publications)

The jump in CPI inflation to 2.7% in April, from 2.3% in March, was only partly to a temporary boost from the later timing of Easter this year. Indeed, inflation likely will rise further over the coming months as food, energy and core goods prices all continue to pick up in response to last year's depreciation of sterling.

17 May. Wage Growth to Continue to Rise, Despite Jobs Slowdown (My Publications)

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.

15 September The MPC Signals Higher Rates Soon, but it is Racked With Doubts (My Publications)

The MPC surprised markets, and ourselves, yesterday with the escalation of its hawkish rhetoric in the minutes of its policy meeting.

16 Nov. 2015 Ignore the Hysteria if Inflation Eased Further in October (My Publications)

October's consumer price figures, to be released tomorrow, look set to show CPI inflation easing to -0.2%, from -0.1%, below the no-change consensus and the lowest rate since March 1960. No doubt this will spark more hyperbolic headlines about the U.K.'s descent into pernicious deflation; ignore them. October's print will almost certainly represent the nadir and we think it will take only a year for CPI inflation to return to the MPC's 2% target.

16 November. 2016 Statistical Quirks Will Flatter September's Jobs Report (My Publications)

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.

16 March 2017 Slowing Wage Gains Support the MPC's Loose Policy Stance (My Publications)

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.

16 August. 2016 Core CPI Inflation is Set for New Cycle Highs, but Not Just Yet (My Publications)

Core CPI inflation plunged in the aftermath of the crash, reaching a low of 0.6% in October 2010. It then rebounded to a peak of 2.3% in the spring of 2012, before subsiding to a range from 1.6-to-1.9%, held down by slow wage gains and the strengthening dollar, until late last year. Faster increases in services prices and rents lifted core inflation to 2.3% in February, matching the 2012 high, but it has since been unchanged, net.

16 December 2016 Black Friday Sales Boom Likely will be Followed by a Bust (My Publications)

The remarkable recent strength in retail sales continued into November, with total sales volumes rising by 0.2% and sales ex-motor fuels up by 0.5%. Those numbers aren't spectacular but they have to be seen in the context of October's huge 1.9% jump in sales ex-motor fuel; usually, after such a big gain we'd expect a correction the following month.

16 Dec. 2015 The Cyclical Rise in Labour Participation Has Run Its Course (My Publications)

Rapid growth in labour supply has enabled the U.K. economy to grow quickly over the last three years without generating excessive wage or inflation pressure. The rise in the participation rate--the proportion of those aged over 16 in or looking for work--has been critical to this revival. But the rise in the participation rate largely has reflected cyclical factors rather than a sustainable upward trend, and the downward pressure on participation from demographic factors will build over the coming years.

16 Feb. 2015 Central Banks in LatAm Concerned about Inflation Pass-Through (My Publications)

Central banks in Chile, Peru, and Mexico hogged the market spotlight last week. Chile left its main interest rate at 3.0% on Thursday, for the fourth consecutive meeting.

14 June 2017 The Squeeze on Real Wages is Intensifying Rapidly (My Publications)

CPI inflation increased to 2.9% in May, from 2.7% in April, exceeding the no-change expectation of both the consensus and the MPC, as well as our own 2.8% forecast.

11 Apr. 2016 Stronger Growth and Accelerating Wages Will Shift Rate Sentiment (My Publications)

A reader sent us last week a series of five simple feedback loops, all of which ended with the Fed remaining "cautious". For example, in a scenario in which the dollar strengthens--perhaps because of stronger U.S. economic data--markets see an increased risk of a Chinese devaluation, which then pummels EM assets, making the Fed nervous about global growth risks to the domestic economy.

BLOOMBERG - Pantheon Chief Economist Worries Wages May Pressure Fed (News and Media)

Ian Shepherdson, chief economist at Pantheon Macroeconomics, discusses the impact of improving wage growth and inflation on the Federal Reserve ahead of today's February jobs report. He speaks on "Bloomberg Surveillance."

INDEPENDENT - UK pay growth data disappoints again as real wages decline at fastest rate in three years (News and Media)

Chief U.K. Economist Samuel Tombs on U.K. Labour Market data for May

1 September 2017 Expect Strong August Payrolls, but Calendar Distortions will hit Wages (My Publications)

Leading indicators all point to a solid August payroll number. Survey-based measures of the pace of hiring signal a 200K-plus increase, and jobless claims--a proxy for the pace of gross layoffs--are at a record low as a share of the workforce.

24 Mar. 2016 In the March Employment Report, Wages are Wild (My Publications)

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.

6 April 2017 Firms in the EZ are Investing Again, but What About Wages? (My Publications)

Readers have asked us about the availability of flow-of-funds data in the Eurozone similar to the detailed U.S. reports. The ECB's sector accounts come close and cover a lot of ground, but are also released with a lag. We can't cover all sectors in one Monitor, but the investment data for non-financial firms, excluding construction, suggest that investment growth slowed last year.

9 Jan. 2015 - Expect Another Robust Payroll Report - Watch Hourly Wages Too (My Publications)

Most of the evidence points to a robust December employment report today, though we doubt the headline number will match the heights seen in November, when the initial estimate showed payrolls up 321K. We look for 275K.

9 May. 2016 Payrolls Will Rebound--Maybe not in May--and Wages Are Rising (My Publications)

The undershoot in April payrolls, relative to the consensus, is a story of a fluke number in just one sector. Retail payrolls reportedly shrank by 3K, after rising by an average of 52K over the previous six months. Our first chart shows clearly that the retail payrolls are quite volatile over short periods, with sudden and often inexplicable swings in both directions quite common.

7 September 2017 Japanese Regular Wages Breaking out of a 20-year Stagnation? (My Publications)

Japanese labour cash earnings data threw analysts another curveball in July, falling 0.3% year-over-year. At the same time, June earnings are now said to have risen by 0.4%, compared with a fall of 0.4% in the initial print.

16 Dec. 2015 LatAm Central Banks Will Tighten in Response to the Fed? (My Publications)

We look for the Fed to increase rates today by 25bp to a range of 0.25%-to-0.50%. The FOMC will likely say that policy remains very accommodative and that rate hikes will be slow. Unfortunately, this will provide only temporary relief to LatAm. According to our Chief Economist, Ian Shepherdson, faster wage gains next year in the U.S. will disrupt the Fed's intention to move gradually. If wages accelerate as quickly as we expect, the Fed will need to raise rates more rapidly than it currently expects, which is also faster than markets anticipate. That, in turn, will put EM markets and currencies under further pressure.

07 May. 2015 Inflation Expectations, not Greece, are Pushing EZ Yields Higher (My Publications)

Even though Greece managed to avert default yesterday by paying €200M in interest to the IMF, our assumption is that the country remains on the brink of running out of money. Our view is supported by the government's decision to expropriate local authority funds, and reports that the government's domestic liabilities, excluding wages and pensions, are not being met.

8 Apr. 2016 Tame Inflation Pressures Leave Banxico Room to Breathe (My Publications)

Good news keeps on coming from Mexico, and the outlook is still favourable. Overall inflation pressures remain subdued and the domestic economy remains reasonably solid, despite a modest slowdown in recent months. Job creation remains robust, and real wages have been growing at a solid, non-inflationary pace.

19 January 2017 Wage Growth Won't Force The MPC to Hike Rates This Year (My Publications)

The most striking aspect of yesterday's labour market report was the pick-up in the headline three month average year-over-year growth rate of average weekly wages, to a 14-month high of 2.8% in November, from 2.6% in October. Although still low by pre-recession standards, wage growth now is close to the rate that might worry the MPC.

17 Sept. 2015 No rate hike today - December a better bet than October? (My Publications)

We expect the Fed not to raise rates today. In the eyes of the waverers who will need to change their minds in order to trigger action, the latest data-- especially wages--do not make a compelling case for immediate action, and the obvious fragility of markets strengthens the case for doing nothing today. This is a Fed which in recent years has greatly preferred to err on the side of caution. With no immediate inflation threat, the waverers and the doves will take the view that the cost of delaying the first move until October or December is small. As far as we can tell, they are the majority on the committee.

IG - US labour market driving the need for a rate rise from the Fed (News and Media)

Dr Ian Shepherdson, chief economist at Pantheon Macroeconomics, says that while US rates will rise by 0.25% on 14th December, the central bank needs to continue to move rates up or wages will spiral up out of control.

WALL STREET JOURNAL - Economists react to the May jobs report: "Unambiguously Positive" (News and Media)

Chief US economist Ian Shepherdson on the latest Jobs report

MARKETWATCH - The stock market is too complacent about risk of higher rates, says top forecaster (News and Media)

Chief U.S. Economist Ian Shepherdson named Market Watch forecaster of the month for July

WALL STREET JOURNAL - Economists react to the May jobs report: "Unambiguously Positive" (News and Media)

Chief US economist Ian Shepherdson on the latest Jobs report

WALL STREET JOURNAL - Economists react to the May jobs report: "Unambiguously Positive" (News and Media)

Chief US economist Ian Shepherdson on the latest Jobs report

Access Key Enabled Navigation

Keywords for: Search Results: 265

pantheon macroeconomics, pantheon, macroeconomic, macroeconomics, independent advice, independent analysis, advisors, advisers, advisor, advice, independent, analysis, research, economic intelligence, economy, economic, economics, economists, Dr. Ian Shepherdson, Ian Shepherdson, financial market, financial, market, finance