Economic Recoveries Restrained by Worker Fears of Catching Covid

September 3, 2021

U.S. August labor statistics highlight a mix of weakening jobs growth and strengthening upward pressure on prices. Non-farm payroll jobs rose only 235k, about a third as much as was forecast. This undershoot overwhelmed a combined 132k upward revision of jobs growth in June-July. Although the unemployment rate and under-employment rate dropped by 0.2 and 0.4 percentage points to 5.2% and 8.8%, labor market participation and the number of hours worked per week failed to rise. It’s becoming apparent that ending augmented unemployment benefits isn’t going to coax more people back to work given the unfinished task of reestablishing safe working conditions for occupations that require close personal contact. The deterrent has been multiplied extensively because families can’t obtain affordable childcare.

The August labor market figures also revealed that average hourly earnings jumped 0.6% on month, twice what was expected, and 4.3% on year. So the two Fed mandates for tapering are in conflict, and investors are taking away the view that the disappointment over jobs growth will be the greatest priority.

U.S. purchasing manager surveys reported today also highlighted a loss of recovery momentum.

  • The IHS-compiled service-sector purchasing managers index fell 4.8 index  points to an 8-month low, and the composite PMI of 55.4 signified the slowest rate of growth in 11 months.
  • The ISM non-manufacturing PMI had touched a record high in July but then dropped 3.6 index points last month.  Business activity and prices each dropped by 6.9 index points.

The dollar on balance is  just marginally softer, dipping 0.1% on the weighted DXY measure, the euro and the Swiss franc and losing 0.2% overnight against the yen, loonie and sterling. Still greater dollar depreciation occurred against the Aussie dollar, kiwi, peso and yuan.

U.S. share price declines have been minimal. French, German, Italian, Hong Kong and Spanish exchanges have fallen more significantly, but the Japanese Nikkei (+2.3%) got a lift from news that Prime Minister Suga has decided to step down before elections later this year.

Ten-year sovereign debt yields rose 3-4 basis points in Germany, Great Britain and the United States.

Gold and WTI  oil have risen 0.6% and 0.2%.

Other August purchasing manager reports this Friday present a mixed picture:

  • Euroland’s composite and services PMI fell to 3- and 2-month lows but, each printing at 59.0, reflect quite robust activity growth.
  • Japan‘s composite and services PMI readings were each revised further south of 50 to 15-month lows of 45.5 and 42.9.
  • China’s composite and service PMIs likewise printed at 16-month lows of 47.2 and 46.7.
  • Russia‘s composite and service-sector indices (48.2 and 49.3) represent 8-month lows.
  • The British PMI readings of 54.8 overall and 55.0 for services showed the slowest positive growth since February and were down from 62.9 peaks in June.
  • India‘s services PMI leaped 6.2 points to an 18-month high of 56.7 and helped lift the composite Indian PMi to a 4-month high of 55.4.
  • Australia‘s CBA-compiled composite and services PMIs fell to 15-month lows of 43.3 and 42.9, and the AIG Australian construction PMI tumbled 10.3 points to a one-year low of 38.4.
  • Brazil‘s composite purchasing managers index slipped 0.6 points to a 2-month low of 54.6 despite a 114-month high services PMI of 55.1.
  • Sweden‘s service-sector PMI of 64.7 attests to robust growth but, being down from 71.7 in May, represents a 5-month low.
  • South Africa‘s Standard Bank-compiled private PMI rebounded from July’s 11-month low of 46.1 to a 2-month high of 49.9 in August.
  • Singapore‘s private PMI dipped to a 2-month low of 52.1 from July’s 39-month high of 56.7.

Several countries also reported retail sales, and waxing and waving Covid conditions created a lot of volatility there as well.

  • Retail sales in the euro area, which were forecast to be little changed in July, instead plunged 2.3% in volume terms. Previously sales had risen 1.8% in June and 4.1% in May but dropped 3.8% in April after gains of 4.1% in March and 4.3% in February. Sales in July were up 3.1% from a year earlier.
  • Singapore retail sales climbed 0.8% in July, less than half June’s increase of 1.9%, but were only 0.2% greater than a year earlier versus on-year growth of 79.9% as recently as May.
  • July retail sales in Poland, Romania and Hungary were up 0.6%, up 0.1% and down  0.2% versus June.

Turkish CPI and PPI inflation accelerated in August to a 28-month high of 19.25% and a 34-month peak of 45.5%.

Labor productivity in Canada advanced 0.6% last quarter, breaking a string of three consecutive quarterly declines.

The global number of Covid infections moved above 220 million. U.S. cases in the last 24 hours exceeded 170k, and Thursday saw over 1500 Americans die from the disease.

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

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