1)Payrolls in October grew by 128k, well better than the estimate of 85k and the two prior months were revised up by a net 95k. The unemployment rate ticked up by one tenth to 3.6% but because the size of the labor force grew by 325k, above the increase in the household survey of 241k (with a gain in the key 25-54 age area). The all in rate rose one tenth too to 7%. Manufacturing employment was better than expected while service sector hiring remained steady. Hours worked and average hourly earnings were as expected with the former at 34.4 hours and the latter up by .2% m/o/m and 3% y/o/y. Combining the two puts average weekly earnings up 2.7% y/o/y, the same trend as in September. The participation rate ticked up by one tenth to 63.3% while the employment to population ratio held at 61%. The level of job leavers remained high at 14.5%. A sign that we are finding it more difficult to find new workers is the ‘pool of available labor’ which fell to the lowest level since December 2000. The private sector 3 month average job gain is now 154k vs the 6 month average of 138k and 12 month average of 162k.
2)The 3rd insurance rate cut is in, let’s hope for a soft landing.
3)The US economy grew by 1.9% q/o/q annualized. This compares with the estimate of 1.6% and helping with the beat was the 2.9% gain in consumer spending vs the estimate of 2.6% along with a price deflator that was 2 tenths less than expected and thus lifted the REAL rate. Investment spending was soft and trade was a slight drag. Core PCE rose 2.2% q/o/q annualized.
4)The Employment Cost Index for Q3 rose .7% q/o/q as expected. Going direct to the most important component, private sector wages and salaries rose 3% y/o/y, the same pace as in Q2 and Q1.
5)The PCE core inflation rate in September was up 1.7% y/o/y as expected and compares with 1.8% in August. The headline rate moderated to 1.3% from 1.4% y/o/y.
6)The average 30 yr mortgage rate ticked up another 3 bps to 4.05%, the highest since late July but had no impact on mortgage apps on the week. Purchase apps rose 2.3% w/o/w after 3 weeks of declines. Versus last year they are up a still good 10%. Refi’s fell .5% after a 17% drop in the week prior but because rates are still down about 100 bps y/o/y, refi’s are up by 134% y/o/y.
7)Pending home sales in September when taken with the slightly lower revision in August was better than expected by 4 tenths when combined. They rose 1.5% m/o/m after a 1.4% gain in August. An increase in the South and Midwest offset declines in the Northeast and West. In defining the trade off between higher prices but lower mortgage rates, the NAR said “Even though home prices are rising faster than income, national buying power has increased by 6% because of better interest rates.” As to what happens from here, the NAR makes a good point, “interest rates will surely not decline in a sizable way, so the changes in the median price will be the key to housing affordability. But home prices are rising too fast because of insufficient inventory.”
8)The Eurozone economy grew 1.1% y/o/y in Q3 as expected after a 1.2% rise in Q2 and 1.3% in Q1. This marks the 5th quarter in a row with a 1 handle. Inflation was also reported and the core rate was up 1.1% y/o/y in October vs 1% in September and vs the estimate of 1%. The headline rate was higher by .7% y/o/y as forecasted.
9)The consumer confidence index in France in October held steady with September at 104. That’s the highest since January 2018 and for perspective, it plunged to 87 at the height of the Yellow Vest protests.
10)The UK manufacturing PMI for October stayed below 50 but rose to 49.6 from 48.3. Markit said “The manufacturing downturn continued at the start of the final quarter as uncertainties surrounding Brexit, the economic outlook and domestic politics all took their toll.”
11)Both South Korea and Japan reported upside surprises to their industrial production figures for September.
12)Buying ahead of the hike in the VAT, retail sales in Japan rose 7.1% m/o/m, double the estimate of up 3.5%. Household appliances and cars led the way and expect a hangover in October.
13)By looking at the Tokyo region only in October, CPI rose .7% y/o/y ex food and energy as expected and up from .6% in September. Low inflation is a good thing.
14)China’s private sector weighted Caixin manufacturing index rose to 51.7 from 51.4 and that was better than the estimate of 51. New orders rose back above 50 “and reached the highest point since February 2018, due likely to the US’ move to exempt more than 400 types of Chinese products from additional tariffs.”
15)Congrats to the Montreal Expos, I mean Washington Nationals, for finally winning the World Series. Gary Carter, Tim Raines, Vlad Guerrero, Randy Johnson, Pedro Martinez, Andre Dawson and many others are very proud.
1)ADP’s private sector job survey recently is more muted than the BLS. Their 3 month average for private sector job growth is 126k (28k below BLS) vs the 6 month average of 112k (26k below BLS) and 12 month average of 163k (about even with BLS).
2)Initial jobless claims rose to 218k from 213k and that was 3k more than expected and last week was revised up by 1k. As a print of 220k came out of the 4 week average, it fell to just under 215k from just over. Continuing claims, delayed by a week, rose by 7k to quietly the highest since mid August.
3)The US economy is in such a ‘good place’ according to Fed members that it can only handle a fed funds rate of 1.5-1.75%, below the rate of every single inflation gauge except one?
4)The October ISM manufacturing index was 48.3, up .5 pt from September but below the estimate of 48.9. This marks the 3rd month in a row below 50. New orders rose 1.8 pts m/o/m but still below 50 at 49.1. Backlogs fell another pt to only 44.1. The employment component was up 1.4 pts to 47.7 but still below 50 for a 3rd month and just 5 of 18 industries are adding employees vs 4 last month. ISM specifically said “Labor force reduction concerns increased, indicated in 40% of employment comments.” Export orders were the standout, jumping by 9.4 pts to back above 50 at 50.4 but only 5 of 18 industries saw growth and “Two of the six big industry sectors expanded, and four contracted during the period.” Imports on the other hand fell 2.8 pts to 45.3, the least since May 2009. Zero companies saw growth in imports. Of the 18 industries surveyed, just 5 saw growth but up from 3 in September and vs 9 in August. 12 saw contraction vs 15 last month. ISM said “Comments from the panel reflect an improvement from the prior month, but sentiment remains more cautious than optimistic…Overall, sentiment this month remains cautious regarding near term growth.”
5)Within the NABE Business Conditions Survey released this week, they said “the US economy appears to be slowing, and respondents expect still slower growth over the next 12 months.” On that hiring question, “Hiring was far less prevalent at panelists’ firms in the third quarter, as was wage and salary growth.” The hiring index component fell to a 5 year low. With respect to the influence of tariffs, “Two-thirds of respondents from the goods producing sector indicate that tariffs have had negative impacts on business conditions at their firms.” This all resulted in “fewer respondents reported increased capital spending on equipment and information technology at their firms than at any time in the past five years.”
6)The Dallas PCE trimmed mean inflation gauge rose to 2.06% y/o/y in September, the highest since April but just as a kid puts their hands over the eyes and thinks they disappeared, the Fed only relies on the PCE which gives the lowest inflation read to partially substantiate their policy stance.
7)Bloomberg weekly consumer confidence index (the old ABC consumer confidence index) had its biggest one week drop since March 2011 falling to 61 from 63.4. It typically moves up or down less than 1 pt week to week. The glaring weakness was from those who make less than $50k where confidence “slid by the most in records back to 2010, while sentiment of those earning more was little changed” according to Bloomberg.
8)The Conference Board’s consumer confidence index for October fell a touch to 125.9 from 126.3. The estimate was 128. This is a 4 month low where the two main components were mixed with the Present Situation up while Expectations fell to the lowest since January. One year inflation expectations were unchanged at 4.8% and which is the same print seen one year ago. Of note, those that said they see More Jobs under the Employment category fell to a 6 month low while those that see ‘Fewer Jobs’ rose to the most since September 2016. Business expectations moderated by 1.4 pts m/o/m to the lowest since March. Spending intentions were mixed. The bottom line from the Conference Board was that “The Present Situation improved, but Expectations weakened slightly as consumers expressed some concerns about business conditions and job prospects. However, confidence levels remain high and there are no indications that consumers will curtail their holiday spending.”
9)US goods exports fell 1.6% m/o/m and 3% y/o/y in September to the lowest level since February 2018. Imports dropped by 2.3% m/o/m and 4.6% y/o/y and sit at the least amount since November 2017.
10)Europe’s economic confidence index in October shifted lower again to 100.8 from 101.7. The estimate was 101.1 and that’s the lowest since January 2015. Manufacturing led the way but services softened further too as did consumer confidence and retail confidence. Construction was the only bright spot and helped by rock bottom rates.
11)Instead of encouraging more lending and borrowing after the ECB’s September 12th move to more QE and NIRP, the opposite happened. Loan growth to businesses rose 3.7% y/o/y, down from 4.3% in August. Lending to households rose 3.4% y/o/y, unchanged with August. Money supply growth defined as M3 rose 5.5% y/o/y, down from 5.8% in August and below the estimate of 5.7%.
12)In October the number of unemployed in Germany rose 6k, twice the forecast of 3k but comes after a drop of 9k in September. Their unemployment rate held at 5%, the lowest since Checkpoint Charlie went down.
13)The nice rebound this year in French consumer confidence did not translate into spending in September as sales slipped by .4% m/o/m instead of staying unchanged as expected.
14)The Chinese manufacturing state sector weighted PMI fell to 49.3 from 49.8 while services weakened to 52.8 from 53.7. Within manufacturing, new orders fell back below 50 and exports dropped 1.2 pts m/o/m to 47. In services, new orders also fell below 50.
15)Hong Kong’s economy contracted by 2.9% y/o/y in Q3, well worse than the estimate of down .3%.
16)Governor Kuroda of the BoJ still has faith that 2% inflation is achievable, 7 years after first trying and he continues to claim they have more firepower in order to get there if needed. He won’t fully be done I guess until the BoJ owns 100% of the JGB and ETF market.
17)Japan’s labor market weakened in September as their unemployment rate rose to 2.4% from 2.2% and what the estimate was and the jobs to applicant ratio fell unexpectedly to 1.57 from 1.59. That’s the lowest since November 2017.
18)Exports in October in Vietnam fell .8% y/o/y, well less than the estimate of up 10%. Imports, many of which end up as exports, rose just 3.5% y/o/y vs the forecast of up 9.3%.
19)South Korean exports in October fell 14.7% y/o/y, a bigger drop than the estimate of 13.6%. It’s the 11th month in a row of y/o/y contractions. Imports were down by 14.6% vs the forecast of a decline of 13.7%.
20)Taiwan’s October manufacturing PMI fell to 49.8 from 50. Japan’s dropped to 48.4 from 48.9, and is the weakest in 40 months. Thailand’s PMI declined to exactly 50 from 50.6. Indonesia’s is down to 47.7 from 49.1. Vietnam’s fell to 50 from 50.5. India’s fell to 50.6 from 51.4. South Korea’s remained below 50 but rose a touch to 48.4 from 48.