U.S. August Employment Report Didn’t Change Monetary Policy Outlook
September 2, 2022
Each month, an estimate from ADP of private employment growth arrives two days before the highly anticipated U.S. Labor Department employment report. Sometimes, but not always as this month proved, the ADP provides early notice concerning the accuracy of street forecasts for employment growth. ADP had estimated only a 132k increase in U.S. private sector jobs, less than half the consensus of analysts. However, today’s Labor Department release showing gains of 308k in private jobs and 315k in total employment last month turned out to be marginally above, not well below, what analysts had been assuming. The gestalt of a resiliently tight labor market in the face of rising interest rates was reinforced by a 0.3 percentage point increase in labor market participation to 62.4% and a third straight 5.2% year-on-year growth of average hourly earnings. These strengths outweighed a rise in unemployment to a 6-month high of 3.7% and downward revisions to employment growth in both June and July.
Equities got a lift from the U.S. labor market data. In an otherwise down week, the DOW, S&P 500 and Nasdaq were up around 0.5% from Thursday’s close. In Europe, share prices did even better, with gains of more than 1% in the U.K., Germany, France and Italy. In contrast, the weakness had continued in the Pacific Rim, where stocks closed down 0.9% in Taiwan, 0.7% in Hong Kong, 0.6% in Singapore, and 0.3% in Australia.
Ten-year sovereign debt yields have dropped back six basis points in Germany and five basis points in the United States.
Speculation about the possibility of OPEC agreeing to oil output cuts to firm prices lifted WTI’s price 2.6% today. Gold and Bitcoin are up 0.8% and 0.9%.
The weighted DXY dollar index had touched a 20-year high Thursday of 109.98 but has declined almost 0.7% from that level. Still, it remains closer to levels in early 1986 of 122 and mid-2001 of 119 than to its March 2008 low of around 72. In overnight trading, the dollar fell 0.6% against the New Zealand and Australian dollars, 0.3% against the Canadian dollar, and 0.2% versus the euro. Dollar/yen and EUR/USD are straddling 140 and parity, while sterling, which has never dipped below $1.00 but got awfully close in February 1985, is on the weak side of $1.16. Prior to a devaluation of the pound in November 1967, it had been fixed at $2.80.
Alongside the aforementioned U.S. employment situation report, Friday’s other notable data release today was a sizzling jump in euro area producer prices during July. Led by a 9.0% monthly upsurge in energy prices, the PPI leaped 4.0% versus June and by a record 37.9% compared to July 2021.
In South Korea, by contrast, consumer prices dipped 0.1% on month in August, which reduced the year-on-year inflation rate there from a 24-year high of 6.3% in July to a 3-month low of 5.7%.
A 1.0% monthly drop in U.S. factory orders during July defied expectations of a marginal increase and was the largest decline in 27 months. An 11.6% year-on-year increase in orders was down from an average 13.8% advance in the first half of 2022.
Germany’s chronic trade surplus continues to be depleted by soaring energy import costs. The unadjusted surplus fell to EUR 4.9 billion in July from EUR 17.8 billion in July 2021, reflecting on-year growth of 26.1% in overall imports versus +10.8% in exports. The seasonally adjusted trade surplus was EUR 5.4 billion last month, down from EUR 6.2 billion in June and EUR 17.5 billion in July 2021. Seasonally adjusted exports and imports were each lower than in the prior month.
Brazilian industrial production rose 0.6% in July, reversing a 0.4% drop in June and keeping the year-on-year rate of decline at 0.5% from thje third time in four months.
Singapore’s manufacturing purchasing managers index slipped 0.1 point to a 27-month low of 50.0 in August, which indicates such neither rose nor fell.
Labor productivity increased last quarter in Canada for the first time since the second quarter of 2020, albeit by a mere 0.2%. A 2.1% year-on-year decline in productivity contributed to a 6.6% increase in unit labor costs between 2Q 2021 and last quarter.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland producer prices, U.S. employment situation, U.S. factory orders
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