Positives
1)Payrolls grew by 263k, 8k more than expected and the two prior months were revised up by a combined 11k. The private sector added 288k and thus the government shed workers, mostly in education (seasonally adjustments). The household survey added a similar amount of jobs, 204k but when combined with a drop in the labor force of 57k (after the huge 786k jump in August), the U3 unemployment rate fell two tenths to 3.5%, matching again the pre covid low. The all-encompassing U6 rate fell 3 tenths to 6.7% after rising by a like amount last month. Hours worked were as expected at 34.5 and wages were also as anticipated, with average hourly earnings up .3% m/o/m and 5% y/o/y. The participation rate fell one tenth to 62.3% after rising by 3 tenths last month. The important 25-54 grouping saw its participation rate also tick down by one tenth to 82.7% but after jumping by 4 tenths in August. It was at 83% in February 2020. The employment to population ratio was unchanged at 60.1% which compares with the February 2020 print of 61.2%. Job leavers as a % of the unemployed rose again to 15.9% from 15.2% in August, 14.8% in July, 14% in June and 12.8% in May. That’s the highest since 1990.
2)The September ISM services index fell only modestly to 56.7 from 56.9 and better than the estimate of 56. Of the 18 industries surveyed, 15 saw growth vs 14 in August. The ISM said “there have been improvements regarding supply chain efficiency, operating capacity and materials availability; however, performance remains less than ideal. Employment continued to improve despite the restricted labor market.”
3)The September Logistics Managers Index rose to 61.4 from 59.7. The storage of goods is strong but the actual movement of them continues to slow. LMI said “Transportation continues its slump, while warehousing is chugging along at the same breakneck pace we have observed for much of this post-pandemic recovery period. Much of this confusion can be attributed to the high levels of inventory that continue to permeate global supply chains.”
4)US vehicle sales in September according to Wards Automotive totaled 13.49mm which was in line with expectations. That compares with 13.18mm in August and 12.18mm in September 2021 that was the low print last year.
5)Manheim said its wholesale used car price index fell 3% in September from August. It’s now down .1% y/o/y. “In September, Manheim Market Report values saw larger than normal declines that were consistent over the month, culminating in a 2.5% total decline in the Three Year Old Index over the last four weeks.”
6)The August US trade deficit shrunk to the smallest since May 2021, which could lift GDP estimates but for negative reasons as both imports and exports fell.
7)Regular pay in Japan did accelerate in August to a 1.6% gain, the best since 1997.
8)Manufacturing PMI’s rose m/o/m in Thailand, Indonesia and the Philippines in September. Singapore’s PMI rose too m/o/m.
9)The September UK mfr’g PMI was also revised down by .1 pt to 48.4 but that is up from 47.3 in August and vs 52.1 in July.
10)The UK services index for September was revised up to 50 from 49.2 while still down from 50.9 in August.
11)Congrats Aaron Judge! //www.youtube.com/watch?v=jblL-wh4YmY
Negatives
1)Initial jobless claims totaled 219k, 15k more than expected and up from 190k last week. The 4 week average though was little changed at 207k vs 206k last week and vs 216k in the week before. Continuing claims rose to 1.361mm from 1.346mm and 11k above the estimate.
2)The number of job openings in August shrunk by more than 1mm to 10.05mm from a revised 11.17mm in July. That is the least amount since June 2021. The hiring rate held at 4.1% but that is the lowest since January 2021. The quit rate was also unchanged m/o/m at 2.7% and which matches the lowest since May 2021.
3)The September ISM manufacturing index fell to 50.9 from 52.8, 1.1 pts below expectations and that’s the lowest since May 2020. In terms of breadth, 9 saw growth and 7 contracted with the balance seeing no growth. That compares with 10 reporting growth and 7 seeing a contraction in August with one experiencing no change.
4)The KPMG Global CEO survey was released “which asked more than 1,300 CEOs at the world’s largest businesses about their strategies and outlook.” The results reflected “More than 8 out of 10 anticipate a recession over the next 12 months, with more than half expecting it to be mild and short….14% of senior executives identify a recession among the most pressing concerns today, up slightly from early 2022 (9%), while pandemic fatigue tops the list (15%). In anticipation of a recession, “76% have already taken precautionary steps.” What does this mean for the labor market? “With continued economic turmoil, there are signs the Great Resignation could be cooling down, with 39% of CEOs having already implemented a hiring freeze and 46% considering downsizing their workforce over the next 6 months. However, the three yr view is more optimistic with only 9% expecting a further reduced headcount.”
5)The JPM Global Manufacturing PMI printed 49.8 for September, a hair under the 50 breakeven level between expansion and contraction. That’s the lowest since June 2020.
6)CNBC said “A significant consumer pullback is showing up in ocean shipping with logistics managers telling CNBC they have seen a 20% drop in ocean freight orders for the months of September and October. The decline in demand cuts across many products, including machinery, housing, industrial and some apparel. Logistics CEO’s explain to CNBC the reason is a combination of too much inventory coupled with a lack of clarity on consumer demand.”
7)Household spending in Japan, while up 5.1% y/o/y in nominal terms in August, was below the estimate of up 6.7% as wages are growing less than inflation.
8)Hong Kong’s September PMI fell back below 50 at 48 from 51.2. While the SAR is trying to distance itself from covid, “Covid disruptions were reportedly the primary factor weighing on overall sector performance, with firms signaling that limitations on meeting up and a general hesitancy among some customers impacted demand and activity. Firms therefore registered renewed contractions in order book volumes and output,” according to S&P Global. There is hope though that the move away from strict covid limits will improve the economic situation, “with the Covid situation improving towards the end of September and quarantine measures for international travelers having eased, we could hope to see Hong Kong SAR’s private sector rebound in the months ahead.”
9)South Korea’s September manufacturing PMI fell further below 50 at 47.3 from 47.6 in August. That’s now the 3rd month in a row in contraction. S&P Global said “Goods production slumped at its sharpest rate since the beginning of Covid in the first half of 2020, reflecting weak demand, client order cancellations and overstocked inventory levels at both producers and their customers alike.”
10)Manufacturing PMI’s for September fell m/o/m in Japan, Australia, Taiwan, Vietnam, India, and Malaysia.
11)Tokyo said headline CPI in September rose 2.8% as forecasted while the core rate accelerated to a 1.7% y/o/y gain from 1.4% in August and that was one tenth more than expected. That is also the biggest increase since late 1992 when not including the impact of value added tax hikes.
12)Japan reported its quarterly Tankan report for Q3. The large company mfr’g index fell to 8 from 9. The estimate was 10. The services component though did rise 1 pt q/o/q. That same mix was seen for smaller companies where mfr’g was in contraction while services improved. The end of covid restrictions helps to explain as tourism is picking up in Japan.
13)Taiwan’s exports and imports both unexpectedly fell in September. Exports to China and Hong Kong in particular fell 13.3% y/o/y.
14)After already going at a modest pace, the RBA hiked interest rates by 25 bps to 2.60% and not the 50 bps that was widely anticipated. Governor Lowe said “The cash rate has been increased substantially in a short period of time. Reflecting this, the Board decided to increase the cash rate by 25 bps this month as it assesses the outlook for inflation and economic growth in Australia.”
15)Germany factory orders in August dropped by 2.4% m/o/m, more than the estimate of down .7% but July was revised sharply higher to a 1.9% gain from the initial print of down 1.1%. The reason for the large upward revision had to do with large aerospace orders that showed up late in the data collection. Overall, the Federal Statistics Office said this, “Enterprises still have difficulties completing their orders as supply chains are interrupted because of the war in Ukraine and distortions persist that have been caused by the Covid crisis.”
16)August PPI in the Eurozone rose by 43.3% y/o/y. Ex energy prices, PPI was still up 14.5% y/o/y.
17)The September Eurozone mfr’g PMI was revised down a hair to 48.4 from 48.5 initially and that is down from 49.6 in August. It’s now down for the 8th straight month with the war in Ukraine starting the downward spiral. S&P Global said “Excluding the initial pandemic lockdowns, Eurozone manufacturers have not seen a collapse of demand and production on this scale since the height of the global financial crisis in early 2009. The downturn is being driven primarily by the surging cost of living, which is reducing spending power and hitting demand, but soaring energy prices are also increasingly limiting production at energy intensive manufacturers. Worse looks set to come, with orders slumping at a significantly steeper rate than production is being cut.”
18)The Eurozone September services PMI as revised to 48.8 from 48.9 initially and that is down 1 pt from August and compares with 51.2 in July, 53 in June and 56.1 in May. S&P Global said, “Soaring inflation, linked to the energy crisis and war in Ukraine, is destroying demand at the same time that business confidence is slumping to levels not seen since the region’s debt crisis in 2012, excluding pandemic lockdowns. Companies and households alike are therefore cutting back on discretionary spending and investment in preparation for a harsh winter.”
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.