Category Archives: Employment

Payrolls

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Much higher than expected, so unless next month’s number settles back down the Fed will be expected to hike rates some.

Note from the chart that the last few November releases showed similar spikes followed by much lower prints:
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Employment Situation
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Highlights
Bring on that rate hike! Nonfarm payrolls surged 271,000 in October vs expectations for 190,000 and against Econoday’s top-end forecast for 240,000. Revisions in prior months are not a factor. The unemployment is down 1 tenth at 5.0 percent with average hourly, to underscore all the strength, jumping 0.4 percent. Government payrolls did not inflate the headline payroll gain as private payrolls rose 268,000. There’s still one more employment report to go before the December FOMC but it seems academic following today’s report.

Among the superlatives, the 240,000 rise for nonfarm payrolls is the strongest since December last year. The 5.0 percent unemployment rate is the lowest since April 2008. The broadly defined U-6 unemployment rate, a favorite of Janet Yellen’s, is down 2 tenths to 9.8 percent for the lowest reading since May 2008. The year-on-year rate for average hourly earnings, at plus 2.5 percent, is the strongest since July 2009.

Payrolls in professional & business services surged 78,000 in the month with the subcomponent of temporary help services – considered a leading indicator of future hiring – up a very strong 25,000. Trade & transportation rose 51,000 while retail trade, which is gearing up for the holidays, rose 44,000. Construction spending is strong and payrolls show it, up 31,000 in the month. But the tide failed to lift the export-hit manufacturing sector where payrolls were unable to rise, unchanged in the month following two prior declines.

Payroll employment growth still looks to be decelerating since the oil price collapse:
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And this is from the Household survey employment report, also decelerating since the oil price collapse:
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Job Cuts, Yellen Comment, Saudi Pricing, German Factory Orders, Maersk Job Cuts, China Trade Show

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Down a bit but still trending higher since the oil price collapse:
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Seems she still doesn’t realize negative rates are just another tax:

FED’S YELLEN: IF ECONOMY SIGNIFICANTLY DETERIORATED, NEGATIVE RATES AND OTHER TOOLS WOULD BE ON THE TABLE

This implies the rest of Saudi pricing remains the same from November, when discounts to benchmarks were substantially increased.

In general, discounts have been increased over the last few months:

Saudi Arabia, the world’s largest oil exporter, raised pricing for December sales of all its crude grades to Asia as profit for refiners improved in the country’s largest market. OPEC’s biggest producer cut its monthly pricing for all blends for buyers in the U.S.

State-owned Saudi Arabian Oil Co. increased its official selling price for Arab Light grade crude by 30 cents to a discount of $1.30 below the regional benchmark, the company said in an e-mailed statement. That beat expectations for a 25-cent increase, according to the median estimate of of six refiners and traders surveyed by Bloomberg this week.

The chart shows that discounts were set at the wides back in Feb, then relaxed some, and are now generally back towards the wides, indicating the desire to keep prices down:
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German Factory Orders Unexpectedly Decline for Third Month

Nov 5 (Bloomberg) — German factory orders, adjusted for seasonal swings and inflation, fell 1.7 percent in September from August, when they dropped 1.8 percent. Orders declined 1 percent from a year earlier. Factory orders dropped 2.8 percent in the third quarter from the previous one. Demand from within the country increased 0.3 percent and was up 0.9 percent for the euro area. Non-euro-area orders fell 8.6 percent in the July-to-September period. In September, orders for investment goods from the euro area fell 12.8 percent, reflecting a drop in demand for big-ticket items. Excluding bulk orders, demand fell 0.4 percent.

Maersk Line to Cut 4,000 Jobs as Market Deteriorates

Nov 4 (WSJ) — Danish conglomerate A.P. Møller-Maersk A/S saidWednesday its Maersk Line container-shipping unit would cut 4,000 jobs from its land-based staff of 23,000. It is also canceling options to buy six Triple-E vessels. Maersk said it would also push back plans to purchase eight slightly smaller vessels. The conglomerate said it would cut its annual administration costs by $250 million over the next two years and would cancel 35 scheduled voyages in the fourth quarter. That is on top of four regularly scheduled sailings it canceled earlier in the year.

Sliding Canton Fair orders signal poor outlook for producers

Nov 5 (Nikkei) — Foreign orders at China’s leading trade show slipped 7.4%. Chinese producers and overseas buyers at this year’s autumn session of the China Import and Export Fair, better known as the Canton Fair, signed contracts for $27 billion in goods, down from $29.1 billion last fall. Traffic from Europe shrank more than 10% from last fall amid the continent’s hazy economic outlook. The total value of contracts inked at the fair declined from the year-earlier figure for the eighth straight session, drawing alarmingly close to the $26.2 billion total from spring 2009.

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Atlanta Fed, German Engineering Orders, Misc News, Redbook retail sales, North Dakota, Factory orders

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Down to 1.9 for Q4, after being very close for Q1, Q2 and Q3:
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German Engineering Orders Hit by Lower Demand From China

By Nina Adam

Nov 2 (WSJ) — Germany’s VDMA engineering federation said Monday that its “plant and machinery makers are battling against global markets’ adversities.” German mechanical engineering orders slumped 13% year-over-year in September, hit by a 18% drop in foreign demand. Foreign orders from outside the eurozone were down 7% in the nine months through September from the same period a year earlier. “Companies are feeling the pinch from turbulences in China, which are also affecting other key developing markets,” said Olaf Wortmann, an economist at VDMA, which represents more than 3,000 midsize companies.

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Still depressed but a hopeful forecast, though not long ago 2.8% year over year growth would have been considered low:

Redbook
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Redbook’s same-store sales tally has been climbing, up 4 tenths in the October 31 to a year-on-year plus 1.9 percent. But the report’s commentary is mixed, saying some retailers benefited from Halloween shopping though it said the fact that Halloween fell on Saturday actually kept shoppers out of stores on Halloween itself. The report’s month-to-month reading shows no meaningful change against September. But the report’s outlook for the key shopping month of November is very strong, forecasting 2.8 percent year-on-year same-store sales growth for the month.

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Bad, worse then expected, and prior month revised lower as well:

Factory Orders
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Highlights
New orders for the export-hit factory sector fell 1.0 percent in September for the 11th decline in 14 months. Orders for durable goods, initially posted in last week’s advance report, are unrevised at minus 1.2 percent, held down in part by a downswing in civilian aircraft but nevertheless showing wide weakness. Orders for non-durable goods, pulled down by weakness for petroleum and coal products, fell 0.8 percent to extend a run of sizable declines going back to July. The factory sector has been struggling with weakness in the energy sector and especially weak foreign demand that for U.S. goods has been made weaker by the strength in the dollar.

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Industrial Production, JOLTS, Consumer Sentiment

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The chart says it all.
Not good!

Industrial Production
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Highlights
Industrial production continues to sink, down 0.2 percent in September which is slightly better than the Econoday consensus for minus 0.3 percent. The manufacturing component continues to sink, down 0.1 percent for a second straight decline and the fourth decline in five months. Industrial production was revised sharply upward for August, from an initial decline of minus 0.4 percent to only minus 0.1 percent. But the improvement is due to sharp upward revisions to the utility and mining components, less so for manufacturing where the revised decrease now stands at minus 0.4 percent for only a 1 tenth improvement from the initial reading.

Motor vehicle production, which swung up and down through the summer, settled in with a 0.2 percent gain for September. Looking at the long-term trend, vehicle production is at the top of the report with a year-on-year gain of 9.4 percent in strength underscoring that demand right now is domestically based. Business equipment production, which is closely tied to exports, slipped 1 tenth in September for a year-on-year increase of only 1.8 percent. Consumer goods, which are centered for the domestic market, gained 0.2 percent for a year-on-year rate of plus 2.6 percent.

Overall capacity utilization slipped 3 tenths to 77.5 percent with manufacturing utilization down 2 tenths to 75.9 percent. Note that excess capacity in the manufacturing sector is a factor that is holding down the costs of goods.

Turning quickly to the other components, utility production, driven by September’s unseasonable cooling needs, jumped 1.3 percent and also now 1.3 percent in August as well, up from an initial reading of plus 0.6 percent. Mining production, which has been pulled lower by commodity prices, fell 2.0 percent in the month with year-on-year contraction standing at minus 5.7 percent. Mining production in August is now revised to unchanged from an initial decline of minus 0.6 percent.

The industrial sector, specifically the manufacturing sector, continues to struggle, largely the result of weak exports. This report plays into the hands of the doves who can argue that the factory sector, also underscored by yesterday’s contraction in the Empire State and Philly Fed reports, is facing serious risks going into the New Year.
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A bit of a zig down:

JOLTS
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Highlights
Job openings fell back in August, to 5.370 million from 5.668 million in July. Though revised downward from an initial 5.753 million, July remains a standout and a recovery best for job openings. The August rate, though down 5.3 percent from July, is still respectable and above June’s 5.323 million rate.

However, the quit rates, which is watched as an indication of worker confidence, does remain stubbornly low, unchanged for a fifth month at 1.9 percent.

This report had been big news but much less so with the September report. Still, openings are solid and consistent with strong demand in the labor market.

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A hopeful move up, but low historically and still trending lower:

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Capex Revision, Gallup Spending Survey, PMI, ISM Non Mfg Index

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A gauge of U.S. investment plans slipped more in August than initially estimated, giving a cautionary sign for the economic outlook.

New orders for non-military capital goods outside of aviation fell 0.8 percent in August, the Commerce Department said on Friday.

The government had previously reported that this gauge, which is a leading indicator of business investment, had fallen 0.2 percent during the month.

Shipments of this category of goods also fell, declining a sharper-than-initially reported 0.4 percent and giving a bearish signal for third-quarter economic growth.

New orders for overall U.S. factory goods fell 1.7 percent in August, Friday’s report showed. Analysts had expected new orders for factory goods to fall 1.2 percent.
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Yet another consumer spending chart that shows it’s been going down since the drop in oil prices that most insisted would cause a sharp increase:
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The ‘Markit’ surveys aren’t all that credible but do make news:
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Also lower than expected and more credible, and indicates to me the service sector is now following the manufacturing sector that’s already gone negative. Interesting how the ‘Highlights’ narrative below sees it otherwise:

ISM Non-Mfg Index
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Highlights
Understandable slowing in new orders and business activity, which have been extraordinarily strong in the two prior reports, pulled down ISM’s non-manufacturing index to a still very solid 56.9 in September.

One component, however, that did not slow and which, had it been released last week, would have sent the wrong signal for the employment report is a 2.3 point jump in the employment index to 58.3. This, together with July’s 59.6, are some of the strongest readings in the 18-year history of this series and a puzzle given softness in the government’s payroll data.

Readings throughout this report are very strong including backlogs which have been building for four straight months and new export orders which have been rising for five months (note that foreign demand for U.S. services has proven very resilient at the same time that foreign demand for U.S. goods has been declining sharply.) The price indication in this report shows slight contraction in contrast to other surveys where price contraction is very sharp.

This report, together with the services PMI released earlier this morning, underscore the fundamental domestic-based strength of the U.S. economy.
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And now the Fed’s own labor market indicator is suggesting weakness as well:

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Employment, Atlanta Fed, Draghi comments

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A shocker for most analysts/entirely in line with my narrative of insufficient deficit spending-public or private-to offset unspent income, aka demand leakages. And it’s only going to get worse until appropriate fiscal adjustments are implemented. The cut in oil capex, which was the only thing supporting growth after the tax hikes and sequesters, triggered a downward spiral, with lower employment, lower income, and lower spending working it’s way through the economy.

Employment Situation
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Highlights
Forget about an October rate hike and maybe forget about a December one too. The September employment report came in weaker than expected on all scores with nonfarm payroll at 142,000, well under the low estimate for 180,000. To seal the matter, downward revisions to the two prior months total 59,000. Average hourly earnings also came in below the low end estimate, at an unchanged reading and a year-on-year rate of 2.2 percent which is also unchanged. And the labor market is shrinking! The labor participation fell 2 tenths to a nearly 40 year low of 62.4 percent.

Note how it all went bad after oil prices collapsed:
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Back down to .9% on reduced exports, and soon to go lower with the employment revisions:
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Managing expectations as they rearrange the deck chairs on the Titanic…:

ECB President Mario Draghi Says Eurozone Returning to Growth After Policy Moves

Oct 2 (WSJ) — ECB President Mario Draghi said the eurozone had returned to “sustained growth, under the impulse of our monetary policy.” The results were “good news for everybody, everywhere,” he said. Mr. Draghi said the eurozone accounts for 17% of global GDP and 16% of global trade, so the strength of the eurozone was critical to maintain at a time of uneven global growth. “The progress achieved over the past three years to stabilize and strengthen the euro area is real,” he said. “Growth is returning. The way forward is well identified. And we will not rest until our monetary union is complete.”

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Challenger Job Cuts, Claims, ISM Manufacturing, Construction Spending

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Looks like it started trending higher after oil prices collapsed:
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Nothing happening here yet, I suspect it’s at least partially about restrictions on eligibility, etc.
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Bad:

United States : ISM Mfg Index
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Highlights
The ISM index, like nearly all other September indications, is pointing to trouble for the factory sector. At 50.2, the index is at its lowest point since May 2013. New orders, at 50.1, are at their lowest point since August 2012. Backlog orders, at a very low 41.5, are in their fourth month of contraction and won’t be giving manufacturers much breathing room to keep up production. Export orders, at 46.5, are also in their fourth month of contraction and are a key factor behind the general weakness.
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July revised down .3 and August .1 higher than expected. And the elevated year over year growth rate is vs a dip last year. Looking at the chart below you can see the rate of growth has resumed at the lower, prior levels, and that the level of spending spending, which is not inflation adjusted, remains below prior levels, and on an inflation adjusted basis construction remains depressed. Not to mention the spike in permits, exacerbated by NY tax breaks that expired June 15, seems to have reversed:

United States : Construction Spending
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Highlights
Construction spending is picking up, at plus 0.7 percent in August for a year-on-year gain of 13.7 percent. Construction of single-family homes rose a solid 0.7 percent in the month with continuing gains certain given strength in permits. Multi-family construction, driven by rising rents, jumped 4.8 percent in the month and is up 25 percent year-on-year. The year-on-year gain for single-family homes is lagging but is still very strong at 14.0 percent.

Gains were also posted in private non-residential construction, at 0.2 percent following July’s 1.6 percent jump, with gains continuing to be centered in manufacturing in strength that belies other indications of weakness in business investment. Year-on-year, non-residential construction is up 17 percent. Public construction remains subdued with year-on-year gains in related components in the mid-single digits.

Strength in construction, including strength in new homes, looks to offset not only unevenness in existing home sales but also what appears to be a breaking down in the factory sector.
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Exports, Energy Layoffs, Tax data, Restaurant Performance Index

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This is a prelude to the reality of soft exports and rising imports impacting GDP reports:

U.S. Goods Exports Plummet as Dollar Rises, Commodity Prices Fall

Sept 29 (WSJ) — Exports of goods slid a seasonally adjusted 3.2% to $123.09 billion as overseas sales of industrial supplies—which includes oil—autos, consumer goods and foods all fell, according to the Commerce Department’s advance report on trade in goods. Imports, meanwhile, advanced 2.2% to $190.28 billion on a surge in consumer goods and a smaller rise in capital goods, widening the trade gap. The goods deficit expanded 13.6% to $67.19 billion last month. The Commerce Department is due to release the full report on trade on Oct. 6.

This is still happening nearly a year after oil prices collapsed.

Energy layoffs still in progress, including nat gas companies:

Chesapeake cuts 15% of workforce on oil slump

Looks like historically this chart leads the cycle down:
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Now looking like it’s faded after oil prices collapsed, vs expectations of the opposite:
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Mtg Purchase Apps, Chicago PMI, ADP, Euro Comment

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This is still going nowhere, and, most recently, trending lower, and obviously not responding positively to the ultra low rates of the last several years:

MBA Mortgage Applications
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Highlights
After surging in the prior week following the FOMC’s decision against a rate hike, mortgage activity fell back in the September 25 week. The purchase index fell 6 percent in the week but still remains up strongly year-on-year, at plus 20 percent. The refinance index fell 8.0 percent in the week. Rates continued to move lower in the week with the average 30-year mortgage for conforming loans ($417,000 or less) down 1 basis point to an average 4.08 percent.

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Yet another negative shock.

And note that it all went bad after the collapse in oil prices:

Chicago PMI
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This is their forecast for Friday’s number, and the downward trend since November continues for both ADP and the BLS payroll series:

ADP Employment Report
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Highlights
ADP’s call for Friday’s September employment report is on the high side but only slightly, at 200,000 for private payroll growth vs Econoday expectations for 190,000. ADP’s call for August, an initial 190,000 now revised to 186,000, proved much stronger than the initial government total of 140,000. Today’s result won’t likely shake up the outlook for Friday’s employment report where another month of moderate improvement is expected.
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From ADP:

Goods-producing employment rose by 12,000 jobs in September, off from 15,000 the previous month. The construction industry added 35,000 jobs in September, almost double the 18,000 gained in August. Meanwhile, manufacturing dropped into negative territory losing 15,000 jobs in September, the worst showing since December 2010.

Revealing CNBC headline, as ultimately ‘purchasing power parity’ does hold. That is, high inflation means the value of the currency is falling, and longer term currencies that experience high inflation depreciate vs currencies with low inflation. That is, high inflation policy is not the stuff of strong currencies, regardless of interest rates.

So what the headline is implying, at best, is that the ECB policy response will be to lower rates/do more QE to promote inflation, and thereby weaken the currency. It is also probably implying that a lower rate and QE per se make
the euro weaker.

My narrative is a bit different. I see the deflation as further supporting the euro area’s record high and growing trade surplus, a force which fundamentally drives the euro higher, as non residents continuously sell their currencies to buy euro to pay for imports from the euro area. This ultimately drives the euro higher, as happened with the yen for the 2 decades it ran large and persistent trade surpluses, along with a zero rate policy, and far more QE than the ECB or the Fed has done.
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Redbook Retail Sales, Richmond Fed, Architectural Index, Mtg Purchase Index, Chemical Activity Barometer, China, Unemployment Duration Chart

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No sign of improvement:
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Bad:

Richmond Fed Manufacturing Index
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Highlights
Early indications on the September factory sector are negative and now include a minus 5 headline from the Richmond Fed. New orders, unfortunately, are even more deeply in the negative column at minus 12 which points to even weaker activity in the months ahead. Shipments are already in the negative column for a second straight month at minus 3. And manufacturers in the region have already worked down their backlogs to keep up production with backlogs in deep contraction at minus 24 and minus 15 the last two months. Employment is in the plus column but just barely at 3 and it won’t stay there for long if orders and production continue to weaken. Price readings are moderating further to round out an unpleasant picture of unexpected slowing. Last week’s Philly Fed report and especially the Empire State report also pointed to weakness this month. Watch for the manufacturing PMI on tomorrow’s calendar which will give a national look at the September factory sector.

Down as well:
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Moved up some for the week but as per the chart still drifting a bit lower:
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Looks like it’s maybe heading south:

September 2015 Chemical Activity Barometer Says Economy Will Continue to Slow

from the American Chemistry Council

The Chemical Activity Barometer (CAB), dropped 0.4 percent in September, following a revised 0.2 percent decline in August. The pattern shows a marked deceleration, even reversal, over second quarter activity. It is unlikely that growth will pick up through early 2016.
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‘Markit’ reports like this PMI are always suspect but narrative is interesting:

PMI Manufacturing Index Flash
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Highlights
Growth in Markit’s manufacturing sample remains as slow as it’s been since October 2013, stuck at 53.0 for the September flash. The reading is the same as the final August result and little changed from August’s flash of 52.9. It’s also below the recovery’s 54.3 average.

Growth in new orders is the slowest since January with businesses citing caution among customers and subdued business conditions. Export orders, hurt by weak foreign demand and strength in the dollar, have been very weak this year but did improve slightly in the latest report. Slow orders are leading the sample to slow hiring and trim inventories. The latest gain for employment is only marginal and the weakest since July last year.

Prices are especially weak in the report, showing the first drop in four months for input costs and the first drop in finished goods since August 2012. Fed policy makers, concerned by low inflation, are likely to take special notice.

The 53.0 headline points to more strength than many of the details of the report. Together with the September run so far of regional surveys, the manufacturing sector does not look like it’s having much of a month. Watch for durable goods orders tomorrow for definitive data on August followed by the Kansas City manufacturing update for September.

Fiscal does work if they ‘do what it takes’. Maybe the policies of the western educated kids has been over ruled by their elders?

Production declines further as total new orders fall at faster pace

Sept 23 (Markit) — Flash China General Manufacturing PMI at 47.0 in September (47.3 in August). Manufacturing Output Index at 45.7 in September (46.4 in August). The decline indicates the nation’s manufacturing industry has reached a crucial stage in the structural transformation process. Overall, the fundamentals are good. The principle reason for the weakening of manufacturing is tied to previous changes in factors related to external demand and prices. Fiscal expenditures surged in August, pointing to stronger government efforts on the fiscal policy front.

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