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The chance of a zero GDP print for the first quarter diminished--but did not die--last week when the president signed a bill granting full back pay to about 300K government workers currently furloughed.
The weekly jobless claims numbers tend to be choppy around the turn of the year, and our take on the seasonal adjustments points to a clear increase in today's report, for the week ended January 11, even without the impact of the government shutdown.
Japan's average year-over-year wage growth slowed sharply in May, but this mainly was a correction of the April spike.
We have been rigorous in using the word nascent whenever referring to Japan's wage-price spiral.
Youth unemployment remains a blemish on the Eurozone economy, despite an increasingly resilient cyclical recovery. The unemployment rate for young workers aged 15-to-24 years stood at 18.4% at the end of April, chiefly due to high joblessness in the periphery.
If the economy is to enter recession, falling business investment probably will have to be the main driver. Growth in consumer spending likely will slow sharply over the next year as firms become more cautious about hiring new workers and inflation begins to exceed wage growth again.
Investors and market observers of a relatively bearish persuasion argued over the weekend that the details of the October employment report were less encouraging than the headline, principally because the household survey showed that all the job growth, net, was among older workers, defined as people aged 55-plus. This, they argue, suggests that most of the increased demand for labor was concentrated in low-paid service sector jobs, where older workers are concentrated, perhaps reflecting retail hiring ahead of the holidays. Such a wave of hiring is unlikely to be repeated over the next few months, so payroll growth won't be sustained at its October pace.
Chief U.S. Economist Ian Shepherdson on the record-breaking number of U.S. Unemployment Claims this week
While we were away, EM growth prospects and risk appetite deteriorated, due mainly to rising geopolitical risks and Turkey's currency crisis.
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.
While financial markets remain obsessed with the Brexit saga, January's labour market data provided more evidence yesterday that the economy is coping well with the heightened uncertainty.
November's labour market data were the last before the MPC's February meeting, when it will conduct its annual assessment of the supply side of the economy.
The stand-out news from August's labour market report was the pick-up in the headline three-month average rate of year-over-year growth in average weekly wages, excluding bonuses, to 3.1%--its highest rate since January 2009--from 2.9% in July.
Labour costs are rising so quickly that the MPC cannot justify an "insurance" cut in Bank Rate to counteract the impending damage from Brexit uncertainty in the run-up to the October deadline.
Korea's jobs report for August was a stonker, with unemployment plunging to 3.1%, from 4.0% in July, marking the lowest rate in more than five years.
September's labour market report suggests that wage growth won't continue to rise for much longer.
Korea's unemployment rate rose faster than expected in May, jumping to 4.5%, from 3.8% in April. We've been arguing for some time that the delayed impact of the economic growth slowdown from late- 2017 to early-2019 would eventually push the jobless rate to the mid-4% level this year; the sudden stop caused by Covid-19 merely sped up this process.
The most important retail sales report of the year, for December, won't be published today, unless some overnight miracle means that the government has re-opened.
This was supposed to be the year that wage growth finally would pick up and signal clearly to the MPC that the economy needs higher interest rates.
Where to start with the January employment report, where all the key numbers were off-kilter in one way or another?
Given the light flow of data this week we want to go back for a closer look at the market-shattering January hourly earnings data.
We look for a 150K increase in September payrolls, rather better than the August 130K headline number, which was flattered by a 28K increase in federal government jobs, likely due to hiring for the 2020 Census.
Our below-consensus 125K forecast for today's February payroll number is predicated on two ideas.
China's official manufacturing PMI for May, out tomorrow, will give the first indication of the coming hit from the resumption of its tariff war with the U.S.
We expect a 350K print for October payrolls today. The ADP report was stronger than we expected, suggesting that the post-hurricane rebound will recover more of the ground lost in September than we initially expected.
Low-income households will feel the full force of the Covid-19 downturn and will have to slash their expenditure aggressively.
China's FX reserves data pointed to an about-turn in net capital flows in May, with capital leaving the country again after two months of net inflows, and a current account deficit in Q1.
Japan's unemployment rate edged back up to 2.5% in February after the drop in January to 2.4%.
April's labour market data show that slack in the job market is no longer declining, while wage growth still isn't recovering. As a result, we no longer think that the MPC will raise Bank Rate in August and now expect the Committee to stand pat until the first half of 2019.
Data last Friday showed Japan's labour market trends deteriorating.
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.
Korea's labour market took an overdue breather in March after an extremely volatile start to the year.
Yesterday's third and detailed EZ GDP data confirmed the economy hit the wall in Q1.
Japan's industrial production data for May carried more evidence that the economy is getting a lift--at least temporarily--from the front-loading of activity ahead of the scheduled sales tax increase in October.
French industrial production data surprised to the upside yesterday. Output rose 0.1% month-to-month in September, a solid gain following an upwardly-revised 1.7% rise in August, and also higher than the consensus, forecast for a 0.4% fall. The details, however, were less upbeat than the headline. Transport equipment fell, as expected, following production being pushed forward ahead of the Summer holidays. But this story was overshadowed by a 22.5% month-to-month jump in oil refining-- included in manufacturing--as refineries resumed full production following maintenance over the summer.
Our view that households will continue to spend more in the first half of this year, preventing the economy from slipping into a capex-led recession, was not seriously challenged yesterday by the BRC's Retail Sales Monitor.
A cursory glance at July's labour market report gives no cause for alarm. The headline, three-month average, unemployment rate returned to 3.8% in July, after edging up to 3.9% in June.
The case for continuing to increase Bank Rate gradually--recently reiterated by MPC members Andy Haldane and Michael Saunders-- strengthened yesterday with the release of April's labour market report, which revealed renewed momentum in wage growth.
The sudden jump in the headline, three-month average, growth rate of average weekly wages to a 10-year high of 3.3% in October, from just 2.4% four months earlier, might indicate that the U.K. has reached the sharply upward-sloping part of the Phillips Curve.
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.
Korea's jobs report for January was nasty. The unemployment rate spiked to 4.4%, from 3.8% in December, marking the highest level in nine years.
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
Japan's unemployment rate merely edged up to 2.5% in March, from February's 2.4% rate. It probably will end the year around one percentage point higher, though, with the pain extending through the second half.
Wage growth in the euro area slowed slightly last year, consistent with the rapid deceleration in economic growth since the end of 2017, though it remained robust overall.
Friday's sole economic report showed that wage growth in France remained robust mid-way through the year. The non-seasonally adjusted private wage index, ex-agriculture and public sector workers, published by the Labour Ministry, rose by 0.3% quarter-on-quarter in Q3.
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.
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.
Chile's activity numbers at the beginning of Q3 were mediocre, suggesting that the economy remains sluggish. The industrial production index--comprising mining, manufacturing, and utility output--fell by 1.7% year-over-year in July, reversing a 1.6% expansion in June. A disappointing 4.5% year-over-year contraction in mining activity depressed the July headline index, following a 1.4% increase in June. The moderation in output growth was due to maintenance-related shutdowns at key processing plants, and disruptions from labor strikes, especially a three-week strike by contract workers at Codelco--the state-owned mining firm--which badly hit production.
Japan's wage picture has turned ugly for workers, even accounting for sampling distortions. China's current account surplus increase is hard to fathom.
China Is Stabilising, But Not Yet Recovering...Japan's Fiscal Stimulus Faces Capacity Constraints...No New Year Shock This Time For Korean Workers..India's Q3 Wasn;t A Disaster; The RBI Is Done Easing
Brazil's President Dilma Rousseff was removed from office on Wednesday, following an impeachment trial triggered by allegations that Ms. Rousseff used "creative" accounting techniques to disguise Brazil's growing budget deficit, ahead of her re-election in 2014. The Senate voted 61-20 to convict Ms. Rousseff; only 54 votes were needed to oust her. For Ms. Rousseff's leftist Workers' Party, her removal marks the end of 13 years in power.
Japan most exposed workers felt the early Covid-19 hit in March.
The ADP employment report was on the money in October at the headline level--it undershot the official private payroll number by a trivial 6K--but the BLS's measure was hit by the absence of 46K striking GM workers from the data.
December's payroll numbers were unexciting, exactly matching the 175K consensus when the 19K upward revision to November is taken into account. Some of the details were a bit odd, though, notably the 63K jump in healthcare jobs, well above the 40K trend, and the 19K drop in temporary workers, compared to the typical 15K monthly gain.
Chief U.S. Economist Ian Shepherdson on U.S. economy growth
Chief U.K. Economist Samuel Tombs on the latest U.K. Labour Market Data
Chief Eurozone Economist Claus Vistesen on Consumer Spending
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