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Week Ahead – US retail sales and earnings, major Chinese data, and UK inflation and employment readings

US This week Wall Street will learn how quickly the US consumer is weakening and if the manufacturing part of the economy is close to entering recovery…

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This week Wall Street will learn how quickly the US consumer is weakening and if the manufacturing part of the economy is close to entering recovery mode. The US retail sales report for September is expected to show monthly sales increased 0.3%, down from the 0.6% in the previous month. Sales excluding cars and gasoline are expected to rise 0.1%, a tick lower than the August reading.  The Empire Manufacturing survey is expected to show the September surprise 1.9 expansion was not the beginning of a new trend as the headline reading falls to -5.0.  

Much attention will fall on earnings season and a lot of Fed speak.  Big earnings for the week will come from American Express, Bank of America, J&J, Lockheed Martin, Morgan Stanely, Netflix, Procter & Gamble, and Tesla. 

The upcoming week is filled with Fed speak, as traders will focus on Fed Chair Jerome Powell’s speech at the Economic Club of New York and with the release of their Beige Book. The Fed hawks Bowman and Waller will draw extra attention to see if they are close to abandoning their calls for further tightening.     

Washington DC will remain in the spotlight as House Republicans struggle to elect a new House speaker.  

Eurozone

Christine Lagarde is once again the highlight with appearances over the weekend likely to attract interest. That said, I’m not sure how much we can learn at this point, we’ve heard a lot from the ECB President recently. That aside, the final HICP inflation reading will be of interest although revisions are that common and when they do occur, they’re often small.

UK 

There are a number of key economic releases to watch out for next week, the most obvious being CPI inflation on Wednesday but jobs figures on Tuesday and retail sales on Friday will also be very closely monitored. Then there’s BoE Governor Andrew Bailey’s appearance over the weekend which could offer important insight after such a close vote at the last meeting. Huw Pill also appears on Monday.

Russia

Inflation rose faster than expected in September which will keep the pressure on the Russian central bank despite having already raised rates aggressively. Next up it’s PPI and the CBR will be hoping for some better news. 

South Africa

Wednesday is the big day next week with inflation data due first and retail sales later on. Inflation is well within the SARB’s 3-6% target range but it won’t take much to make them nervous again and stimulate debate around the potential need for another rate hike. 

Turkey

No major economic releases or events next week.

Switzerland

No major economic releases or events next week.

China

A busy week on the economic calendar. China central bank, PBoC’s decision on a set of key benchmark policy interest rates will be in the limelight while consensus is expecting another month of no rate cut on the 1-year Medium-Term Lending Facility rate at 2.50% out on Monday, and on Friday, the 1-year and 5-year Loan Prime rates are expected to remain unchanged at 3.45% and 4.2%. However, the persistent liquidity crunch in the property market has led to an increased risk of an impending default by Country Garden, China’s largest private property developer on its due bonds’ principal repayments in recent days may spark a rethinking of China’s monetary policy that is currently operating on a targeted easing approach.

On Wednesday, Q3 GDP, retail sales, industrial production, and the unemployment rate for September will be released. The consensus is expecting a slip in Q3 GDP growth to 4.4% y/y from 6.3% y/y in Q2. If it turns out as expected, it will be the weakest quarterly growth and put the 2023 annual growth target of around 5% at risk of not achieving it.  

Industrial production is expected to ease slightly to 4.3% y/y from 4.5% y/y in August, together with retail sales from 4.6% y/y in August to 4.5% y/y for September. Meanwhile, the overall unemployment rate is expected to hold steady at 5.2% but the concern still lies in the youth unemployment rate that has gone dark since August as China halted the release of such data. Its last publication was for June which saw the youth unemployment rate skyrocketed to an unprecedented level of 21.3%.

On Thursday, the House Price Index is forecasted to revert to a marginally positive growth of just 0.1% y/y in September from -0.1% y/y recorded in August.  

India

No key data releases.

Australia

On Tuesday, RBA meeting minutes will be released, and market participants will be on the lookout for any dovish comments after the official cash policy rate was left unchanged at 4.1% for the fourth consecutive meeting.

Employment change for September will be out on Thursday where it is forecasted to decrease to a smaller magnitude of +15K from +64.9K jobs added in August. So far, data from the ASX 30-day interbank cash rate futures as of 12 October is just pricing in only a paltry chance of 5% on a 25 basis points hike in the cash policy rate to 4.35% for the next RBA monetary policy meeting in November.  

New Zealand

Q3 inflation rate will be released on Tuesday where it is forecasted to ease slightly to 5.8% y/y from 6% in Q2. If it turns out as expected, it will be the third consecutive quarter of moderation in inflationary pressures.

The Balance of Trade for September will be out on Friday, and the trade deficit is forecasted to shrink to NZ$-1.9 billion from NZ$-2.29 billion in August.

Japan

Two key data to focus on. Balance of Trade for September out on Thursday where the trade deficit is expected to shrink to JPY-425 billion from JPY-930.5 billion due to a reduction in imports growth to -12.9% y/y for September from 17.8% y/y in August while exports growth for September is expected to improve to 3.1% y/y from -0.8% y/y in August.

The key national inflation data for September will be released on Friday where the core inflation rate is expected to ease further to 2.7% y/y from 3.1% y/y in August, and the core-core inflation rate (excluding fresh food & energy) is also forecasted to dip to 4.1% y/y from 4.3% y/y in August. If these inflation numbers turn out as expected, the impetus for the Bank of Japan to normalise its negative interest rate policy in early 2024 is likely to be reduced.

Singapore

Balance of Trade and Non-oil exports (NODX) for September will be released on Tuesday. NODX growth has continued to decline in negative territory for eleven consecutive months where it plummeted by -20.1% y/y in August.

Economic Calendar

Saturday, Oct. 14

Economic Events:

  • New Zealand election: Expectations are for a rightward and populist shift
  • Top EU diplomat Borrell speaks after a three-day visit to China.
  • IMF/World Bank meetings run through Sunday. ECB President Lagarde participates in a panel at the G30 international banking seminar.
  • BOE Gov Bailey speaks on the G30 panel on global economic and monetary challenges.

Sunday, Oct. 15

Economic Events:

  • Polish holds a parliamentary election 
  • India’s 20% export levy is set to expire.
  • World Health Summit begins 

Monday, Oct. 16

Economic Data/Events:

  • US Empire Manufacturing index
  • China medium-term lending facility rate
  • India wholesale prices
  • Italy CPI
  • Japan industrial production
  • Philippines overseas remittances
  • US Treasury Secretary Yellen meets with euro-area finance ministers in Luxembourg.
  • RBA’s Jones speaks at AFR Cryptocurrency Summit.
  • Fed’s Harker speaks at a Mortgage Bankers Association event in Philadelphia.
  • ECB’s Villeroy speaks at the Fintech forum in Paris.
  • BOE chief economist Pill speaks at OMFIF Economic and Monetary Policy Institute.
  • Russian Foreign Minister Lavrov visits China through Wednesday.

Tuesday, Oct. 17

Economic Data/Events:

  • US retail sales, business inventories, industrial production, cross-border investment
  • Canada housing starts, CPI
  • Germany ZEW survey expectations
  • Japan tertiary industry index
  • Mexico international reserves
  • New Zealand CPI
  • Singapore trade
  • UK jobless claims, unemployment
  • Earnings from Goldman Sachs and Bank of America
  • Chinese President Xi Jinping hosts world leaders including President Putin at the Belt and Road Initiative forum in Beijing  
  • BOE’s Dhingra is part of an inflation and cost of living panel at the Royal Economic Society Summit
  • ECB’s de Guindos and Knot speak at the Joint ECB/IMF policy and research conference in Frankfurt.  
  • ECB’s Centeno makes opening remarks at a conference in Lisbon about central banks’ sanctioning powers
  • Fed’s Williams moderates discussion with Intel CEO at Economic Club of New York.
  • Fed’s Barkin speaks to the Real Estate Roundtable in Washington.
  • South African Reserve Bank (SARB) issues monetary policy review.

Wednesday, Oct. 18

Economic Data/Events:

  • Federal Reserve issues Beige Book economic survey.
  • US housing starts
  • China GDP, retail sales, industrial production
  • Eurozone CPI
  • Italy trade
  • South Africa retail sales
  • UK CPI
  • Earnings from Morgan Stanley, Netflix, and Tesla
  • RBA Governor Bullock speaks at AFSA annual summit in Sydney.
  • Fed’s Harker speaks at an event at Philadelphia Fed.
  • Fed’s Williams participates in a moderated discussion at Queens College.
  • Sweden’s Riksbank Governor Thedeen and Deputy Governor Floden speak on monetary policy.

Thursday, Oct. 19

Economic Data/Events:

  • US initial jobless claims, existing home sales, leading index
  • Australia unemployment
  • China property prices
  • Japan trade
  • Spain trade
  • Fed Chair Powell speaks at the Economic Club of New York.
  • Fed’s Goolsbee speaks at Wisconsin Manufacturers & Commerce Business Day.
  • Fed’s Bostic speaks on policy and inequality at the New School in New York.
  • Fed’s Harker speaks at CFA society in Philadelphia.
  • Fed’s Logan speaks at a Money Marketeers of New York University event.

Friday, Oct. 20

Economic Data/Events:

  • Canada retail sales
  • China loan prime rates
  • Eurozone new car registrations
  • Hong Kong CPI
  • Japan CPI
  • New Zealand trade
  • Taiwan export orders
  • President Biden hosts the EU’s von der Leyen and Michel in Washington.
  • Fed’s Harker speaks at a Risk Management Association event in Philadelphia.

Sovereign Rating Updates:

– Greece (S&P)**Note could receive first upgrade to investment grade status

– Italy (S&P)

– Netherlands (S&P)

– United Kingdom (S&P) 

– France (Moody’s)

– Ireland (Moody’s)

– United Kingdom (Moody’s)

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

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March 9, 2024

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By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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Mortgage rates fall as labor market normalizes

Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

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2 days ago

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March 8, 2024

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Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250


Below is an explanation of how we got here with the labor market, which all started during COVID-19.

1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  

2-US_Job_Quits_Rate-1-2

3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

Total employment data

4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 




From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

Here are the jobs that were created and lost in the previous month:

IMG_5092

In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.1%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.2%
IMG_5093_320f22

Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January…

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March 8, 2024

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

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