Positives
1)October payrolls grew by 638k, above the forecast of 580k and the two prior months were revised up by a net 15k and this compares with 672k last month. The private sector saw a gain of 906k, well better than the estimate of 680k. The household survey saw a huge gain of 2.2mm and when combined with the labor force increase of 724k, the unemployment rate dropped a full 1000 bps to 6.9%. The all in U6 rate was lower by 7 tenths to 12.1%. Hours worked remained unchanged at 34.8 but with another pick up in manufacturing as inventories get restocked. Average hourly earnings were little changed and a touch below expectations. Average weekly earnings grew by 5.7% y/o/y. The participation rate got back what it lost last month and rose 3 tenths to 61.7% while the employment to population ratio was higher by 8 tenths to 57.4%. There was also a drop in those jobless for under 26 weeks. Bottom line, looking solely at the private sector, after losing 21.2mm jobs in March and April, we’ve since recovered 12.3mm jobs.
2)The October ISM manufacturing index was 59.3 vs 55.4 in September and above the estimate of 56. Of the 18 industries surveyed, 15 saw growth vs 14 in September and 15 in August. Two saw a contraction vs four last month. The ISM said simply, “The manufacturing economy continued its recovery in October.”
3)The MBA said mortgage apps rose 3.8% w/o/w but it was all due to refi’s which were higher by 6.4% w/o/w and 88% y/o/y.
4)Household spending in Japan in September was soft as expected with its 10.2% y/o/y decline, up from a drop of 6.9% in August. But, from Q2, Q3 spending ended up 3.6% helped by the reopenings and transfer payments.
5)Japan saw its services PMI for October rise to 47.7 from 46.9 and while still below 50, it is the highest since January. Markit said the slower decline was mostly due to a “softer fall in new orders. Restrictions relating to the Covid pandemic have continually eased over the course of recent months, allowing service providers to report gradual moves towards a recovery in domestic demand during October. This was not the case for foreign orders, however, which fell sharply as key export markets battle a resurgence in Covid infections.”
6)Japan’s manufacturing PMI rose 1 pt to 48.7 and that was better than the initial print of 48. Exports to China helped in the rebound and positively the overall outlook improved. “Approximately 38% of Japanese manufacturers surveyed foresee an increase in output over the coming 12 months, strengthening the index to its highest reading in over three years.”
7)China’s private sector focused Caixin services index rose 2 pts to 56.8 and that was better than the estimate of 55. Caixin said “the rate of expansion was the 2nd quickest for over a decade, driven by a substantial increase in total new work. However, the resurgence of coronavirus disease cases across a number of export markets led to a quicker decline in new work from overseas. The strong improvement in overall demand conditions nonetheless led to a further rise in staffing levels, while confidence towards the year ahead strengthened to the highest level since April 2012.”
8)China’s private sector Caixin manufacturing PMI rose to 53.6 from 53 and that was better than the estimate of 52.8. The fly in the internals was the export number which “softened notably amid a resurgence of the corona virus across a number of export markets.” That said, “stronger overall market conditions led to an improvement in business confidence, which hit its highest since August 2014.”
9)The Hong Kong October PMI rose 2.1 pts to just below 50 at 49.8. That is the highest level since March 2018.
10)In Singapore its October PMI rose 3.5 pts m/o/m to 48.6, the best since January. Markit said “The recovery in activity is broadening, with output growth seen in manufacturing, services and construction. Consumer services in particular saw an especially strong rebound…Longer term prospects remain positive, with firms expecting Singapore’s move towards Phase Three of reopening and government economic support to boost output over the coming year. Nevertheless, the slow pace of recovery and a global resurgence of Covid cases remain key concerns.”
11)India’s services PMI jumped to 54.1 from 49.8 and Australia’s rose to 53.7 from 50.8. South Korea’s PMI rose to 51.2 from 49.8, India to 58.9 from 56.8, Thailand to 50.8 from 49.9 and Indonesia to 47.8 from 47.2.
12)The Eurozone manufacturing PMI was revised to 54.8 from the 1st print of 54.4 and that was up from 53.7 in September. Markit said “while the data bode well for production during the fourth quarter, the expansion is worryingly uneven.”
13)German industrial production in September was about as expected when including the upward revision to August. The Economy Ministry said “The manufacturing sector is gradually fighting back. New orders and the business climate suggest that the recovery process will continue, even if this path will become even more rocky in view of the pandemic.”
14)Whatever the election outcome, it’s almost over (maybe) and we can move on.
15)One loss closer to the number 1 draft pick.
Negatives
1)ADP agrees with the BLS that about 21mm jobs were lost in March and April in the private sector but they said this week that only 9.6mm of them have been recaptured since after saying 365k jobs were added in October, well below the estimate of 643k.
2)Initial jobless claims were little changed on the week at 751k vs 758k last week and that was slightly above the estimate of 735k. Continuing claims, delayed by a week, fell to 7.29mm from 7.82mm and that was just above the forecast of 7.20mm. Those receiving Pandemic Unemployment Assistance rose a touch to 363k from 359k. For the week ended October 16th, those continuing to receive Pandemic Emergency Unemployment Compensation rose by 278k to a fresh high of 3.96mm but those continuing to receive Pandemic Unemployment Assistance fell to the lowest since May. Combined they total about 13mm and with the addition of regular continuing claims, about 20mm are receiving unemployment benefits of some sort.
3)The October ISM services index fell by 1.2 pts m/o/m to 56.6. The estimate was 57.5. Of the 18 industries asked, 16 saw growth, the same number seen in September. The ISM said “Respondents’ comments are cautiously optimistic about business conditions and the economy. There is a degree of uncertainty due to the pandemic, capacity constraints, logistics and the elections.”
4)Mortgage applications to purchase a home fell by 1.3% w/o/w and are at the same level as May but are still up 26% y/o/y.
5)Total vehicle sales in October totaled 16.21mm at SAAR, below the estimate of 16.5mm and down from 16.34mm in September.
6)Both the BoE and RBA advanced further the same failed policies in addressing the Covid related economic challenges with the former adding to QE and the latter cutting interest rates to just above zero. They also dig themselves a deeper hole in which to hopefully eventually get out of at the same time further hurting loan margins which in turn limits the pace of lending.
7)Japanese income growth in September was up by just .2% y/o/y and separately with a sharp drop in overtime and bonus pay.
8)Vietnam’s manufacturing PMI fell to 51.8 from 52.2, Malaysia to 48.5 from 49 and Taiwan to a still strong 55.1 from 55.2.
9)German factory orders in September rose .5% m/o/m but below the estimate of up 2% and only partially offset by a 4 tenths increase to the August figure. Orders rose domestically and outside the Eurozone while falling within the Eurozone. The Economy Ministry said “After a first strong recovery following the lockdown in April, industry continues to fight its way out of the crisis.”
10)Retail sales in Europe in September fell 2% m/o/m, more than the forecast of down 1.5% and August was revised down by 2 tenths. Expect that to weaken further in October and November.
11)The October Eurozone services PMI was revised to 46.9 from the initial print of 46.2 but that is down from 48 in September and 50.5 in August. Markit said “Service providers have been hit especially hard, led by intensifying weakness in consumer facing sectors such as hospitality, offsetting the brighter news seen in manufacturing during the month. Optimism about the future also slumped sharply lower, sliding to the gloomiest since May as companies grew more anxious about the damaging impact of 2nd waves of infections.”
12)The UK services PMI was revised to 51.4 from the 1st read of 52.3 and down from 56.1 in September and 58.8 in August. According to Markit, “November’s lockdown in England and a worsening Covid situation across the rest of Europe means that the UK economy seems on course for a double dip recession this winter and a far more challenging path to recovery in 2021.”
13)The UK manufacturing index was revised to 53.7 from the 1st read of 53.3 but that is down slightly from the 54.1 seen in September. Markit said “The main drag was a fall back into contraction for the consumer goods industry, blamed in part on lockdowns and falling demand as virus worries intensified among households.”
14)Another week, another loss, now 0-8.