The jury is still out on the continued strength of the US labour market with none of yesterday’s data tipping the balance much, and today’s payrolls report will likely to be the deciding factor. Treasuries stabilised yesterday, leaving Wednesday’s spike in the ten-year yield possibly marking a blow-off top, while equities consolidated the prior day’s gains.
The only significant European data came from France where industrial production fell in August and was .5% lower than a year earlier, with manufacturing giving back all the prior month’s .4% bounce.
Low rate of layoffs points to stable labour demand
After jumping to 75K in August, job cuts announced by US-based employers fell back to 46K last month according to Challenger, Gray and Christmas, although the three-month average ticked up a fraction following several months of declines. Many announced job cuts never materialise and even those that do are spread over several months, but nothing in these latest data pointed to a rapid deterioration of the currently labour market health.
Claims data yesterday reinforced the message of a tight labour market with the rate of job losses remaining low, although the first response of employers to weaker demand would be a slowdown in hiring, rather than a shedding of workers. The number of new claims for unemployment benefit was little changed last week at 207K and the four-week average of these initial claims fell to the lowest since early February. Continuing claims from the week ended September 23rd were also little changed at 1.664m with the four-week average at the lowest since January.
Separately, the NFIB reported the labour market components of its small business survey, where the net percentage of owners finding jobs hard to fill jumped from 40 to 43 – the highest since May. Those expecting to increase employment climbed a point to 18, while the net percentage planning increased compensation was stable at 36.
Positive Q3 contribution likely from net trade
The US nominal trade deficit sank to a multi-year low in August of $58.3m, as exports climbed 1.6% while imports were .7% lower. In real terms. the deficit was 5.1% less than in July and should make a positive contribution to GDP growth in the third quarter, with the Atlanta Fed GDPNow model already assuming a .8 of a percentage point contribution from net trade, before yesterday’s data.
Gasoline price collapse should support consumption
Despite the runup in crude prices during September, refining margins sank and the wholesale price of gasoline failed to rally, with a further fall in the futures price yesterday making a sixth consecutive day of declines. Data from the US Energy Information Administration on Wednesday hinted at possible demand destruction, with gasoline consumption sliding since the end of the summer driving season to the slowest pace on a seasonal basis since 1998. The average price of gasoline at the pump has started rolling over, but the recent plunge in futures prices points to much steeper declines over the next couple of weeks, which will hopefully provide a boost to consumers’ discretionary spending power.
Markets
Fixed Income
Equities
Commodities
Today’s macro agenda
Japan labour cash earnings August
Germany factory orders August, France trade balance August, Italy retail sales August
US nonfarm payrolls and average hourly earnings September
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