Date: September 6, 2019
U.S. Payrolls Rise 130,000, Boosted by 25,000 for Census Count
“U.S. companies’ hiring stumbled in August, likely cementing expectations for a second straight Federal Reserve interest-rate cut as trade uncertainty and softer global growth weigh on the outlook. Private payrolls rose 96,000, a three-month low, after a downwardly revised 131,000 advance the prior month, according to a Labor Department report Friday that trailed the median estimate of economists for a 150,000 gain. Total nonfarm payrolls climbed a below-forecast 130,000, which was boosted by 25,000 temporary government workers to prepare for the 2020 Census count. The jobless rate held at 3.7%, near a half-century low, while average hourly earnings topped forecasts with a 3.2% gain from a year earlier and 0.4% from the prior month. The data suggest bigger cracks are forming in the labor market, which could threaten the chief U.S. economic engine of consumer spending and the record-long expansion itself — along with President Donald Trump’s re-election chances in 2020. With the U.S.-China trade war and weakness abroad already weighing on the outlook and Treasury yields down sharply this year, calls may grow for the Fed to cut interest rates this month by a half point instead of a quarter point. Fed Chairman Jerome Powell will have a chance to clarify the central bank’s outlook on Friday. He is due to speak at 12:30 p.m. New York time, answering questions from a moderator at the University of Zurich. Economists surveyed by Bloomberg had projected 160,000 new nonfarm jobs with unemployment at 3.7% and annual wage gains at 3%. Revisions subtracted 20,000 jobs from the prior two months, bringing the three-month nonfarm average to 156,000. Private employers added an average 129,000 jobs over the last three months. The latest figures contrast with ADP Research Institute data this week showing U.S. companies added 195,000 jobs in August. Still, there were several signs the labor market remains solid. The participation rate, or share of working-age people in the labor force, increased to 63.2%, while the employment-population ratio rose to 60.9%, both up 0.2 percentage point from the prior month. That reflected the household survey’s count of employment rising by 590,000, while the number of unemployed people fell by 19,000 to 6.04 million. In addition, two key early indicators of weakness in the U.S. jobs market — hiring for temporary-help positions and weekly working hours — strengthened in August. But the payroll figures showed weakness in several sectors. Manufacturing added an anemic 3,000 jobs, retailers cut positions for a seventh straight month and education and health services hired the fewest people since February. Industries with solid gains included construction at 14,000 and professional and business services at 37,000. The U-6, or underemployment rate, rose to 7.2% from an 18-year low of 7%. The gauge includes part-time workers who’d prefer a full-time position and people who want a job but aren’t actively looking.”
German Industrial Recession Worsens as Trade Uncertainty Bites
“German industrial production unexpectedly declined further in July as trade tensions and waning business confidence continued to weigh on global demand. Output fell 0.6% from June, missing economist estimates for a slight gain. The numbers point to further deterioration in the outlook for Europe’s largest economy, with production down 4.2% on the year and declining factory orders signaling that no turning point is in sight. The U.S. and China hit each other with a new round of import tariffs this month, the latest in a spiraling trade drama with grave consequences internationally. While officials from the world’s two largest economies have agreed to reconvene on trade in October, skepticism remains on both sides that substantive progress can be made. The euro zone has been mired in a manufacturing-led slowdown for more than a year, with Germany on the brink of recession. “Industrial momentum remains weak,” the economy ministry said in a statement Friday. In light of the soft start in the second half and the absence of a recovery in orders, no improvement in the industry trend is in sight.” In July, investment-goods production and energy output slumped while consumer goods and construction improved. The numbers come on the heels of a report on Thursday that showed factory orders plunged in July. The nation’s jobs market is still holding up though, with a separate report on Friday showing labor costs rose 0.8% in the second quarter. The European Central Bank’s Governing Council will meet next week to set monetary policy, with expectations for further cuts to interest rates and renewed asset purchases running high. A number of officials have expressed their opposition to the latter, raising the question of how forceful President Mario Draghi’s final stimulus push will be before his term ends in October.”
China Ratchets Up Stimulus, Cutting Reserve Ratio to Lowest Level Since 2007
“China’s central bank said it will cut the amount of cash banks must hold as reserves to the lowest level since 2007, injecting liquidity into an economy facing both a domestic slowdown and trade-war headwinds. The required reserve ratio for all banks will be lowered by 0.5 percentage points, taking effect on Sept. 16, the People’s Bank of China said on its website Friday. The PBOC also cut the reserve ratios by one percentage point for some city commercial banks, to take effect in two steps on Oct. 15 and Nov. 15. The cuts will release 900 billion yuan ($126 billion) of liquidity, the PBOC said, helping to offset the tightening impact of upcoming tax payments. That is more than the previous cuts in January and May, which released 800 billion yuan and 280 billion yuan, respectively, the PBOC said at those times. The shift is aimed at supporting demand by funneling credit to small firms and echoes the earlier cuts this year. While limited, it could also put pressure on the already weakening yuan which may antagonize President Donald Trump. PBOC officials indicated recently they are wary of larger-scale easing measures, and have so far refrained from following the U.S. Federal Reserve in cutting benchmark interest rates. The cut “doesn’t reflect an aggressive easing,” said Zhou Hao, a senior emerging markets economist at Commerzbank AG in Singapore. “In fact, China has recently massively tightened property financing. Hence this is still a re-balancing — to lower the funding costs for the manufacturing sector but tighten liquidity in the property sector due to asset bubble concerns.” The Stoxx Europe 600 Index and S&P 500 futures extended gains after the announcement. The offshore yuan gained 0.35% to 7.1128 a dollar as of 6:30 p.m. in Beijing. China’s economy softened again in August after poor results in July, and will likely deteriorate further in the remainder of the year. Trade tension between China and the U.S. expanded onto the financial front recently after China allowed the currency to decline below 7 a dollar, prompting the U.S. to name it a currency manipulator. The central bank emphasized that the policy change wasn’t a massive step up in easing. “The cut is not flooding the economy with stimulus and the stance of prudent policy has not changed,” it said in a separate statement. The RRR cut will offset the tax season in mid-September, and the overall liquidity in the banking system will stay basically stable, according to the PBOC. ‘The cuts don’t mean significant easing in monetary policy,” said Ding Shuang, chief China and North Asia economist at Standard Chartered Bank Ltd. in Hong Kong. “Rather it is something they must do, a sort of marginal easing, in order to prevent tightening in monetary policy.” ”
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