Succinct Summation of the Weeks’ Events:
Positives,
1)Payrolls grew by a whopping 517k, well more than the estimate of 188k and the two prior months were revised up by 71k. That’s the biggest one month job gain since February 2022. The private sector made up 443k of this job gain with the balance from the government. The household survey said 894k jobs were added in January while the labor force grew by 866k with the net result seeing a one tenth drop in the unemployment rate to 3.4%, now below the pre Covid low. The all in U6 rate rose one tenth to 6.6%. The household survey was upwardly influenced by a large population adjustment. Also of note, the work week jumped to 34.7 from 34.4, matching the highest since December 2021. The participation rate was up one tenth to 62.4% and rose 3 tenths for the important 25-54 age cohort and compares with 83% in February 2020. Hourly earnings rose by .3% m/o/m and up by 4.4% y/o/y. Combining the two saw average weekly earnings up 4.7% y/o/y. Job leavers jumped to 15.3%, just below its highs.
2)Initial jobless claims fell 3k w/o/w to 183k and that was 12k less than estimated. This brings the 4 week average to 192k from 198k and that is the least since May. Continuing claims fell to 1.66mm from 1.67mm in the week before but still well above low of 1.3mm last May.
3)Job openings in December got back to 11mm from 10.4mm in November and that was about 700k more than expected. The hiring rate was 4%, up from 3.9% in November and unchanged with October. The quit rate stayed the same at 2.7%.
4)The Employment Cost Index for Q4 rose 1% q/o/q and that was one tenth below the estimate. The private sector component is most important here and the q/o/q rise in wages and salaries was 1% vs 1.2% in Q3, 1.6% in Q2 and 1.3% in Q1. It finished 2021 at 1.1%. Versus last year, private sector wages and salaries were higher by 5.1%, the same pace seen in September. As for other benefits, like healthcare, compensation went up .7% q/o/q vs .8% in Q3, 1.3% in Q2 and 1.9% in Q1. It was .9% in Q4 2021. There were up 4.8% y/o/y.
5)The January ISM services index rebounded to 55.2 from 49.2 and that was well better than the estimate of 50.5.
6)Apartment List released its February National Rent Report and said rents in January fell .3% m/o/m, “marking the 5th straight m/o/m decline.” Also, “This month’s price dip was notably more moderate than the record setting declines we saw from October through December. That said, January’s decline was still sharper than the usual seasonal trend, signaling the continuation of a broader cooldown in market conditions.” The y/o/y growth rate is down to 3.3% and “is now pacing just slightly ahead of the average rate from 2018 to 2019 (2.8%), and is likely to decline further in the months ahead.” More supply is helping here too as the vacancy rate is up to 6.1%, “surpassing 6% for the first time since spring of 2021.”
7)Productivity in Q4 was better than expected with a 3% q/o/q annualized gain vs the forecast of 2.4%. This helped to lower unit labor costs. I like to look at this data though y/o/y and productivity fell by 1.5% and that marks every quarter of 2022 with negative productivity. Unit labor costs rose 4.5% y/o/y with the full yr averaging 5.8%, a clearly higher trend.
8)S&P CoreLogic said its November home price index saw further slowing to a 7.7% y/o/y price increase vs 9.2% in October. Their index was down .3% m/o/m and that is the 5th month of price declines vs the prior month with all 20 major cities seeing m/o/m price drops. An outright price decline of 1.6% y/o/y was seen in San Francisco as this once great city continues to morph. Price gains lagged in Seattle, Portland and LA. The best price gains continue to be in the sunbelt cities like Miami, Tampa, Atlanta, Charlotte and Dallas.
9)Helped by more inventory, January vehicle sales totaled 15.7mm at a SAAR, above the estimate of 15.5mm.
10)Thanks to the reopening, the China Caixin January services PMI rose almost 5 pts to 52.9. The estimate was 51.
11)China’s private sector focused Caixin index rose a touch to 49.2 from 49. The shift with Covid helped but also created short term disruptions. Caixin said “The recent relaxation of Covid containment measures helped to ease pressure on China’s manufacturing sector during January. Output fell at the softest pace for five months, while the downturn in new orders also moderated. Nevertheless, there were reports that the pandemic and relatively subdued market conditions continued to impact customer demand and operations. Notably, staff absences contributed to a further drop in employment and a renewed rise in backlogs.”
12)China said its state sector January manufacturing and services composite index rose to 52.9 from 42.6 with both higher. Manufacturing just got back to 50 at 50.1 while services jumped from 41.6 to 54.4 on the reopening.
13)Hong Kong’s PMI got back above 50 too at 51.2 from 49.1. Singapore’s rose to 51.2 from 49.1. S&P Global said this with Singapore, “Demand conditions improved, supported by better external conditions including the easing of Covid restrictions in China, which heralds a positive start to the new year.”
14)South Korea’s January manufacturing PMI rose to 48.5 from 48.2, Thailand’s was up by 2 pts (tourism beneficiary) to 54.5, Vietnam’s rose by 1 pt to 47.4 and we also m/o/m gains for Indonesia and the Philippines.
15)Taiwan said its December exports fell by 23.2% y/o/y, but a bit better than the drop of 25% that was estimated. Inventory destocking and slower activity were the culprits.
16)Headline January CPI for the Eurozone rose 8.5% y/o/y, down from 9.2% in December and below the estimate of up 8.9% but it was mostly due to a slowdown in energy prices in addition to consumer energy subsidies. Core inflation was higher by 5.2% y/o/y, the same pace seen in December and one tenth more than expected.
17)Europe eked out a slight Q4 GDP increase of one tenth q/o/q vs the estimate of down one tenth.
18)The Fed, ECB and BoE all hiked rates as expected and all don’t have too many left. Focus will shift to QT.
19)The Boss is back on the road, //www.youtube.com/watch?app=desktop&v=tLeZ7EolBDE
Negatives,
1)ADP said the private sector added just 106k jobs in January, well below the estimate of 180k and that is the slowest monthly job gain since October 2019 if we don’t use the Covid timeframe. The service sector added 109k with gains again in leisure/hospitality leading the way. The ‘trade/transportation/utilities’ group lost 41k jobs. The goods producing sector saw a drop in construction jobs of 24k. Manufacturing added 23k, while the commodity related industries lost 2k jobs. ADP blamed weather for some of the weakness even though other parts of the country have had a benign winter so far.
2)Within the ISM services report only 10 industries saw growth out of the 18 surveyed, the lowest since 2016 not including Covid. 8 saw contraction.
3)The S&P Global services PMI was below 50 for a 7th straight month. They said “The downturn is being led by a slump in financial services activity, linked in turn to higher borrowing costs, with consumer facing service providers also reporting especially tough business conditions amid the ongoing squeeze in spending due to the rising cost of living.” They said this on employment, “Hiring has almost ground to a halt as firms reassess their payroll needs in light of the weaker demand environment.”
4)The January ISM manufacturing index fell 1 pt m/o/m to 47.4 and that was below the estimate of 48. It marks the 3rd straight month below 50. Ex Covid, this is the weakest figure since June 2009. 15 of 18 industries asked are seeing a decline in their business. Just 2 (transportation equipment and misc mfr’g) are seeing growth for the 2nd straight month with the other one experiencing no change. There was not one industry that saw a rise in new orders. The last time I saw that was in February 2009 and it never happened during the Covid shutdowns.
5)The S&P Global US manufacturing PMI which covers more businesses than ISM, including small and medium sized ones, saw its final index at 46.9, also below 50 for a 3rd month. They said it “remains at one of the lowest levels recorded since the global financial crisis, including a worryingly steep rate of decline in the health of the goods producing sector.”
6)Mortgage apps fell 9% w/o/w after the new year jump in the prior few weeks. Purchases dropped by 10.3% w/o/w and are lower by 41% y/o/y. Refi’s were lower by 7% w/o/w and by 80% y/o/y.
7)The January Conference Board Consumer Confidence index fell to 107.1 from 108.3 and that was 2 pts under the forecast. The two main components were mixed as the Present Situation was up 3.5 pts m/o/m but Expectations fell by 5.6 pts. One yr inflation expectations rose two tenths to 6.8% after falling by 5 tenths in the month before. For perspective, the 20 yr average is 5.4%. The answers to the job market questions improved as more said jobs were Plentiful and less said they were Hard to Get. On the flip side though, expectations for ‘more jobs’ fell to a 4 month low while higher income expectations were little changed. With respect to spending intentions, there was no change for auto’s and major appliances and fell 3 pts for a home to the lowest since 5 months.
8)Declines in manufacturing PMI’s in January from December were seen in India (after recent strength), Malaysia, and Taiwan (at just 44.3).
9)Vietnam, a newly great proxy for manufacturing, said its exports fell 21.3% y/o/y, double the estimate of down 10.4%, Imports were lower by 29%, also twice the forecast of down 14.4%.
10)A negative because it’s the end for real but ‘Quite the ride indeed,’ //twitter.com/Patriots/status/1620788200573915137