A Negative U.S. Jobs Surprise and Global Covid Cases Climbs Above 200 million Threshold

August 4, 2021

Wednesday brought two pieces of discouraging news. ADP’s 330k monthly estimate of private U.S. employment growth in July was only about half as much as forecasters were anticipating, down from a 2Q average of 729k per month, and the lowest increase since February. Fed officials have made clear that labor market trends will exert very heavy influence over monetary policy in the short run Meantime, the number of globally identified Covid-19 infections moved above the 200 million level; based on mortality trends, the true number is considerably higher. U.S. Covid cases yesterday topped 92.0 thousand versus 13.8k on June 30.

Ten-year sovereign debt yields dropped three basis points today not only in the United States but also in Germany and Great Britain. The 10-year Japanese JGB yield dipped a basisĀ  point and is back at zero percent.

Asian stock markets had done well, closing at least 0.9% stronger today in China, Hong Kong, South Korea, Singapore, and Indonesia, but the Dow and S&P 500 at this writing show 0.4% daily declines, while European exchanges are up as much as 0.7% in Germany’s case.

WTI oil plunged 2.6%. Gold has risen 1.1%, and the dollar is 0.3% softer versus its DXY weighted index. Dollar/yen has a 108 handle.

The monthly parade of purchasing manager surveys shifted mostly over to service sector activity.

  • Euroland services PMI reading in July was revised a shade lower but still at 59.8 represents a 181-month high, good enough to produce a record high composite score for manufacturing and services of 60.2.
  • ISM’s U.S. non-manufacturing purchasing managers index improved 4.0 points to 64.1, and that’s a record high implying the quickest growth in at least 24 years.
  • China’s composite and service-sector PMI readings of 53.1 and 54.9 are 2-month highs, while India’s scores of 49.2 and 45.4 connote the slowest rates of contraction there in 3 and 2 months, respectively.
  • Japan’s services PMI rebounded 2.4 points to a 3-month high of 47.4, but its composite reading of 48.8 was at a 2-month low in July.
  • Although the lowest readings since March, Britain’s composite and service-sector PMI readings of 59.2 and 59.6 were revised above preliminary indications and are consistent with very robust activity. That being said, the data as in many economies corroborate the persistence of supply chain and worker shortages resulting in elevated inflation.
  • Australia’s CBA-compiled composite and service-sector PMI readings of 45.2 and 44.2 matched preliminary results and represent 14-month lows.
  • Russia’s composite PMI fell 3.3 points to a 7-month low and was associated with a 5-month low services PMI of 53.5.
  • A rise in Brazil’s service-sector PMI to a 102-month high of 54.4 helped lift its composite reading to a 9-month high of 55.2.
  • In Sweden, the services PMI in July of 69.1 was at a 2-month high versus an all-time peak of 71.7 in May, while the composite PMI reached a 3-month high of 68.0.

Other purchasing manager surveys reported Wednesday included a 38-month high in Singapore’s private PMI of 56.7, a 3-month low in Hong Hong’s private PMI of 51.3, an 11-month low in the Standard Bank-compiled South African PMI of 46.1, and a 10-month low in Australia’s construction PMI of 48.7.

Retail sales volume in the euro area increased for the fourth time in five months, climbing 1.5% in June. Sales were 5.0% greater than a year earlier. In the second quarter, sales went up 3.4% on quarter and 12.4% compared to the spring quarter of 2020.

Second-quarter New Zealand labor statistics showed a 4.0% jobless rate, which was down from 5.3% in the third quarter of 2020 and its lowest level in a year. labor cost increases accelerated to a 0.9% quarterly pace and surpassed year-earlier levels by 2.1%.

A 4.3% on-year rise in Sri Lankan GDP was the most in 17 quarters.

On the central banking front,

Officials at the National Bank of Georgia authorized this year’s third refinancing rate hike, this time by 50 basis points to 10.0%. There had also been increases of 50 bps in March and 100 bps in April. Tighter monetary policy has been necessitated by a spike in inflation to 11.9%, which is way above the medium-term target of 3%.

At the Bank of Thailand, by contrast, a record low interest rate of 0.5% was retained. Such had been reduced three times during March-May of 2020 by a total of 75 basis points. Central bank officials continue to perceive downside risks to economic growth.

Fed Vice-Chairman Clarida expressed his belief that conditions for justifying the onset of a rising trend in the fed funds target will be in place by the end of next year.

Brazil’s monetary policy committee known as Copom is expected to authorize another hike in the Bank of Brazil’s Selic rate later today.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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