Data Watch

The Notorious Employment Report

Whatever one might say, you´re assured a good laugh from some of the comments. For this report, this was my “elected” commentary: The low unemployment rate could energize Fed officials—such as Boston Fed President Eric Rosengren and Cleveland chief Loretta Mester—who have been calling for higher rates to keep the economy from growing too fast, possibly leading to sharply rising inflation. While payroll employment came in close to forecast, the unemployment rate came in quite a bit below forecast, 4.6% in lieu of 4.9%. But that reflected another drop in the labor force participation, both in headline and for the prime age –… Read More

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Ignore the ISM Manufacturing PMI (and oil prices too)

While it is entirely possible that OPEC’s ability to at least claim it has done a deal to cut output and drive the oil price up, the only way it can stick is if oil demand rises. And oil demand will only rise if there is stronger world growth. There will be no stronger world growth while the US is unnecessarily tightening monetary policy. An OPEC-induced supply cut that temporarily drives up prices will make it more likely that the Fed will unnecessarily tighten. The Fed is famous for over-reacting to higher oil prices; the market would be right to… Read More

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Craving for higher interest rates and oil prices

This is a strange world, indeed! Data released today, plus the oil agreement reached by OPEC, significantly increased long-term interest rates, the dollar, and to a lesser extent, stocks. In other words, the “growth-inflation trade” was revived. ADP Employment Report The ADP non-farm private sector employment report showed an increase of 216 thousand, above the 170 thousand expected. However, the previous two months were revised down by a total of 29 thousand. The ADP is viewed as giving a glimpse into the all-important Payroll, to be released on Friday. Since late last year, a new pattern seems to be forming.… Read More

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Consumer Confidence commands exuberant headlines

Like this one: Americans’ optimism about the economy came roaring back in November, hitting a nine-year high as the economy heads into the key holiday shopping season. The Conference Board said Tuesday its index of consumer confidence jumped to 107.1 in November after dropping to an upwardly revised 100.8 in October. Economists surveyed by The Wall Street Journal expected the index to rise to 101.8 in November. Yes, it is the highest level since August 2007, when the financial crisis officially began with the closing of two Bank Paribas funds. Not to be downplayed is the fact that this “nine-year… Read More

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Markit trumpeted “a sustained acceleration” in the US manufacturing sector in their flash November survey taken in the period after the election. Not so fast, Batman. Sure, their PMI rose very modestly to 53.9 from the previous month’s 53.4 but our chart shows that both the Markit and the Institute for Supply Management (ISM) Manufacturing PMIs have been seriously over-estimating the strength of US manufacturing over the last four years. Both PMIs showed very positive growth in 2013-14 that was mostly certainly not reflected in the actual manufacturing production data. There was a modest uptick in the Manufacturing Production, expressed… Read More

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October’s 4.8% jump in overall durable goods orders was driven by a near doubling in orders for civilian aircraft, a highly volatile segment. When excluding orders tied to transportation and defense, orders increased 1%. The chart shows the year on year growth rates for durable goods orders excluding transportation and defense since mid-2014. After spending the last 17 months in negative territory, growth “jumped” to 1% YoY in October. Growth in orders for nondefense capital goods excluding aircraft, known as “core capital goods orders”, a leading indicator of business investment spending, has been in negative territory for most of the… Read More

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October retail sales and food services growth was surprisingly strong. YoY growth hit 4.3%, helped by some upward revision to September’s figures. The more narrowly-focused “Retail Control” figure that goes into the wider Personal Consumption Expenditure calculation for GDP purposes was also quite strong. It would be good news if nominal spending were running above 4% YoY, but it is only two months of data for the “trend” and there were clearly some odd seasonal adjustments, as the non-seasonally adjusted YoY rate of growth was just 2.1% There may well be some elements of the 60% of consumer expenditure not… Read More

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US Labor Market unchangingly depressing

We have been closely watching the Fed’s own measure of the rate of change of the US labor market since the beginning of the year. Many times, Janet Yellen and her colleagues have told us that the labor market continues to improve but the evidence was that it was worsening – as judged by a measure the Fed themselves created. We suspect the measure was built to try and raise confidence that Fed policy was working to improve the employment situation at a time when the market had less confidence. When the measure started misbehaving the Fed just dropped all mention… Read More

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Knowing your AHE from your AWE, via AWH – PI better, PCE best

The October payrolls engendered the usual interest from inflation hawks keen to find evidence to support monetary tightening. At the end of the day it is the total nominal personal income growth trends that matters and it is very weak. The jobs data itself was not that interesting. The coming hyperinflation was spotted in the modest growth in Average Hourly Earnings (AHE) for All Employees as it soared YoY to a heady rate of 2.8%. Well, big deal. The more reliable, because much longer-term, Production and Nonsupervisory Employees Average Hourly Earnings growth rate showed no such increase and is firmly… Read More

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The labor market in recovery & depression

One should be by now bored to listen to things like “this was a solid employment report”, or “the labor market is strengthening”. But no matter, the Fed will honor its “pledge” to raise rates in December! What must be acknowledged is that the economy is in depression mode. In this context, data analysis and interpretation must change. “Positive” numbers in a depression have a different meaning from positive numbers in a recovery. The labor market is a case in point. It all becomes very clear when you compare the labor market during an economic recovery following a deep recession… Read More

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