Good, Bad and the Ugly

July 8, 2016

June saw a much greater-than-expected recovery in U.S. jobs growth.  Non-farm payroll employment leaped 287K in June after a slightly downwardly revised 11K increase in May.  Jobs grew 147K per month in the second quarter, and the unemployment rate slipped from 5.0% in March to 4.9% in June while touching a 4.7% low for the move in May. Labor participation edged up 0.1 percentage point (ppt) on month to 62.7% in June, but the jobs to population ratio ticked down 0.1 ppt to 59.6%.  Average hourly earnings growth accelerated further to 2.6% on year in June from 2.5% in May and 2.3% in March, but the on-month increase was just 0.1%.  Weekly hours worked stayed at 34.4.

Share prices were buoyed by the U.S. jobs report.  The DOW and S&P 500 are slightly higher.  In the Pacific Rim, the Nikkei lost 0.7%, but share prices rose 1.2% in Hong Kong, 1.1% in South Korea, 0.8% in Taiwan and 0.6% in Australia.  European equities have advanced 1.4% in the U.K., 1.3% in France, 1.1% in Spain, and 0.8% in Germany.

The 10-year Treasury yield is a basis point firmer but still low at 1.39%.  The ten-year gilt yield is two basis points softer, and the 10-year German bund and Japanese JGB yields edged off a basis point.

Gold is essentially steady at $1,361.00 per ounce.  WTI oil rose 0.9% to $45.55 per barrel but seems headed for a weekly loss.

The dollar has faded with losses of 0.7% against the Australian and New Zealand monies, 0.4% versus sterling and 0.2% vis-a-vis the yen.  In contrast, the dollar shows gains of 0.4% against the loonie and Swiss franc and of 0.1% relative to the euro and slip-sliding yuan.

There were a few decent statistical observations today.

  • The seasonally adjusted German trade surplus averaged EUR 23.1 billion in April-May, up from EUR 20.1 billion in the first quarter.
  • Euroland’s current account surplus was 10% bigger in 1Q16 than 1Q15.
  • The British trade deficit of GBP 2.263 billion in May was smaller than forecast, and the goods-only deficit slipped below the GBP 10 billion level to GBP 9.879 billion.
  • Japan recorded an ample current account surplus of JPY 1.809 trillion in May (JPY 1.415 billion seasonally adjusted).

But aside from the U.S. jobs report, the bulk of today’s data releases could be characterized as disappointing or downright bad.

  • Japan’s economy watchers index slumped 1.8 points to 41.2 in June, lowest since the beginning of 2015.
  • Japanese labor cash earnings in May were 0.2% lower than a year earlier.  Wage growth is insufficient.
  • Japanese settlements-basis exports in May were 11.9% lower than in May 2015.  Customs clearance exports in June 1-20 recorded an 11.6% 12-month rate of decrease.
  • In July after the Brexit vote, British consumer sentiment sank 8 points to a reading of minus nine.
  • French industrial production fell 0.5% in May and by 0.3% in the latest three reported months compared to three months earlier.
  • Canadian employment slid 700 workers last month due to a 40.1K drop in full-time positions.  The jobless rate was elevated at 6.8%.
  • Greek consumer prices were 0.7% lower than a year before in June.  Hungary’s CPI dipped 0.2% in the same span.
  • German real manufacturing sales posted a 0.8% monthly drop in May and were 0.3% lower than a year before.
  • A 1.8% on-month drop in German exports in May was the largest slide in nine months.

The social fabric of American life took an ugly turn in Dallas last night, where five cops were killed by rooftop snipers and 7 other policemen were injured at a Black Lives Matter march.  The killings occurred not far from the Kennedy assassination 52-1/2 years ago.  The Republican Party national convention in Cleveland is just a week and a half away, and the Democratic Party national convention in Philadelphia is a week after than.  Each has a potential to elicit violent protests.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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