Solid U.S. Employment Report and Soft European Data
January 5, 2024
Just before U.S. jobs figures were released this morning,
- The dollar showed modest overnight gains of 0.3% against the yen, Swiss franc, Turkish lira and Australian dollar, 0.2% versus the euro and kiwi, and 0.1% relative to sterling and the Canadian dollar.
- Ten-year sovereign debt yields were 7 basis points higher in the U.K. and up 4 bps in Germany and the United States.
- U.S. stock futures were down 0.3%. Asian markets had closed down 0.9% in China and South Korea and 0.7% in Hong Kong but up 0.3% in Japan. European share prices were trading around 1% lower.
- WTI oil‘s price had risen 1.3% further, but bitcoin was 0.5% lower.
A 216k increase in U.S. nonfarm jobs last month was the most since September and exceeded analyst expectations by almost 50k, but job gains in October-November were revised a combined 71k lower. Monthly job growth averaged 165k last quarter, down from 221k in 3Q, 206k in 2Q and 312k in the first quarter of 2023. Average hourly wage growth accelerated unexpectedly to 4.1% on-year, a 3-month high. Weekly hours worked and labor market participation both fell slightly. Unemployment of 3.7% failed to tick higher as had been predicted. Taken in total, labor market conditions failed to soften further. Fed officials need to see evidence of such before cutting rates.
Unlike the U.S. labor market report, Canadian jobs ticked only 0.1k higher, much less than predicted, while the unemployment rate there of 5.8% held steady at a 22-month high. Even so, average on-year wage growth jumped to 5.7% in December from 5.0% in the prior month.
German retail sales plunged 2.5% on month in November, their steepest slump in 19 months, and the 2.4% year-on-year slide was five times greater than anticipated.
Euroland’s construction purchasing managers index printed at a highly contractionary 43.6 in December, not far above October’s 10-month low of 42.7. Germany’s construction PMI bounced above November’s 43-month low of 36.2 but at 37.0 printed below 40 for a fourth straight time. December construction was weaker than forecast in France, too.
Producer prices in the euro area fell 0.3% in November, their first monthly decline since July, and were 8.8% lower than a year earlier. Energy costs were less negative than in prior months with a drop of 23.7%, but all other PPI items collectively fell 0.5% on year after printing 0.2% in the red in October.
The acceleration of consumer price inflation in Euroland from a 28-month low in November to a two-month high of 2.9% last month was less pronounced than forecast and due to a base effect involving energy, whose on-year drop of 6.7% followed an 11.5% plunge in November. Food price inflation slowed to 6.1% from 6.9% in the prior month and 13.8% in December 2022, while core inflation excluding food and energy dropped to a 21-month low of 3.4% from 3.6% in the previous month and 5.5% last July.
CPI inflation in Italy has slowed from 5.3% as recently as September to 0.6% by December.
Great Britain’s construction purchasing managers index rose 1.3 points last month to a 4-month high of 46.8. This was still the fourth straight sub-50 result, implying contraction, and also not far from September’s 10-month low of 45.0. The British Halifax house price index jumped 1.1% on month in December to yield the first on-year rise (albeit just 1.7%) since April.
Japanese consumer confidence improved to a 2-year high in December but remained quite depressed with a reading of 37.2. The Japanese composite and service sector purchasing manager indices rebounded to two-month highs in December of 50.0 and 51.5, connoting a weak pulse nonetheless.
India’s composite and service sector purchasing manager surveys printed last month at 3-month highs of 58.5 and 59.0, respectively.
U.S. share prices were modestly higher just after the opening bell.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland CPI and PPI, German retail sales, Japanese consumer confidence, U.S. employment situation report
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