1)February payrolls grew by a net 678k, well more than the estimate of 423k and the two prior months were revised up by 92k. Of this, the private sector contributed 654k. The household survey said 548k jobs were added and when combined with an increase in the size of the labor force of 304k, the unemployment rate fell to 3.8% from 4% in January and 3.9% in December. This is the lowest since the 3.5% print in February 2020. The all in U6 rate was 7.2% vs 7.1% in January. The participation rate ticked one tenth to 62.3% which also is the lowest since March 2020 when it was at 62.7% and 63.4% in February 2020. The employment to population ratio rose to 59.9% from 59.7% and that matches March 2020 but still below February 2020 when it saw 61.2%. To the tightness of the labor market and the leverage that employees think they have, ‘job leavers’ as a % of the unemployed rose to 15.1% from 14.5% and that matches the highest since April 2000.
2)Initial jobless claims fell to 215k, 10k less than expected and down from 233k last week. The 4 week average fell to 231k from 237k in the week prior. Continuing claims, delayed by a week in its reporting, was 1.476mm, little changed w/o/w and just off the lowest level since 1970.
3)The February ISM manufacturing index rose 1 pt m/o/m to 58.6 and that was just above the estimate of 58. Of the 18 industries surveyed, 16 saw growth vs 14 last month and 15 in December. The ISM said what we already know, “The US manufacturing sector remains in a demand driven, supply chain constrained environment. The omicron variant remained an impact in February; however, there were signs of relief, with recovery expected in March. A higher than normal quits rate and early retirements continued.”
4)The February Logistics Managers’ Index (LMI) index was 75.2, “the 2nd highest in the history of the index, up 3.3 pts from January’s reading of 71.9. This is now 13 consecutive months over 70, which we would classify as significant expansion, with no obvious signs of a slowdown on the horizon. Like January,this month’s growth is driven by rapid growth in inventory levels, which are up 9.1 pts to 80.2, crossing the 80 threshold for the 1st time and shattering the previous record of 72.6. This is a complete 180 from the Fall of 202, when firms struggled to build up inventories. Now it seems that a combination of over ordering to avoid shortages, late arriving goods due to supply chain congestion, and a softening of consumer spending has created a logjam, Inventory Levels are a full 21.4 pts higher than they were in November…There is a possibility that this surge in inventories will result in some price markdowns for durable goods. However, it seems unlikely that this will lead to a meaningful break in the inflation we have observed across supply chains, as Warehousing and Transportation Prices remain high due to the continued mismatch in demand and available capacity.”
5)Talk of China weighing easing its strict stance towards covid?
6)China’s state sector focused manufacturing and services was up a touch to 51.2 from 51 with both components up.
7)The private sector Caixin manufacturing PMI rose to 50.4 from 49.1. The estimate was 49.4. Caixin said “Firms recorded a slight increase in output amid the fastest increase in total sales since last June. However, the pandemic continued to weigh on external demand, with new export orders falling again. Firms meanwhile registered a further drop in employment, which contributed to a fresh increase in unfinished business. Inflationary pressures meanwhile picked up, with both input prices and output charges rising at quicker rates. The outlook brightened, however, with optimism regarding future output improving to an 8 month high in February.”
8)Japan and Australia saw upward revisions to their service PMI’s.
9)February manufacturing PMI’s rose m/o/m in Australia, Thailand, Malaysia, Vietnam and the Philippines.
10)Europe’s service PMI for February was revised down slightly to 55.5 from 55.8 initially. That though is up from 51.1 in January as the omicron wave crashed down.
11)The UK had the same experience with its services PMI at 60.5 in February vs 54.1 in January.
12)The February UK manufacturing PMI was revised up to 58 from the 1st read of 57.3 and that is up from 57.3 in January and vs 57.9 in December. Markit said “Growth was boosted by stronger domestic demand and by firms catching up on delayed work as material shortages and supply chain disruptions started to dissipate. Consumer goods output in particular also benefited from increased sales due to a further easing of Covid restrictions. However, the trend in new export orders is less positive, slipping back into contraction after January’s short lived uptick. While companies maintain a positive outlook for the year ahead, rising headwinds, especially the intensifying geopolitical backdrop, are ratcheting up near term risks to demand and confidence.”
13)Germany said the number of unemployed fell by 33k in February, more than the estimate of down 22.5k.
14)The Bank of Canada increased interest rates by 25 bps as expected to .50% and “expects interest rates will need to rise further.”
1)Putin doesn’t seem like he will stop until he fully takes Ukraine.
2)This week, wheat is up 42%, corn is up 14%, brent crude is up 22%, European natural gas is up 122%, Aluminum is up 14%, Nickel is up 19%, and Palladium is up 25% to name a few.
3)Within the payroll report there was disappointment with the wage data as average hourly earnings were flat m/o/m instead of rising by .5% as forecasted. I do think mix and omicron messed with the numbers. Versus last year average hourly earnings were still up 5.1% and hours worked did tick back to 34.7 after falling to 34.6 in January from 34.8 in December. Combining the hourly earnings with the hours worked puts average weekly earnings up .3% m/o/m and 5.4% y/o/y.
4)The February ISM services index fell to 56.5 from 59.9, below an expected increase to 61.1 and it’s the lowest since February 2021. Of 18 industries asked, 14 saw growth vs 15 in January, 16 in December and 18 in November and October. All 18 industries saw higher prices though. ISM said, “Respondents continue to be impacted by supply chain disruptions, capacity constraints, inflation, logistical challenges and labor shortages. These conditions have affected the ability of panelists’ business to meet demand, leading to a cooling in business activity and economic growth.”
5)The Apartment List March 2022 National Rent Report saw an increase in rents of .6% m/o/m in February. Versus last year they are up 17.6%. Luckily though the pace of gains seems to be plateauing as “over the past four months, rents have increased by a total of just .7%.” That said, “this month’s growth was still faster than the pre pandemic norm for this time of year.” Vacancy rates are ticking up as Apartment List estimates it to be 4.5% after hitting just 3.8% last August but it was at 6% pre covid. Phoenix and Miami saw the fastest rate increases and 74 of the nation’s 100 largest cities saw m/o/m increases. Only the San Francisco area has not seen a return to pre pandemic rent levels.
6)The MBA said mortgage apps were little changed after falling sharply over the past 3 weeks because of the jump in mortgage rates. Measured before the plunge in rates over the past few days, as of last week the average 30 yr mortgage rate hit 4.15%. Purchases fell 1.8% w/o/w and are now down 9% y/o/y. Refi’s were higher by .5% after last week’s 16% fall and are lower by 56% y/o/y.
7)In February, vehicle sales totaled 14.07mm at a SAAR, below the estimate of 14.4mm and down from 15.04mm in January.
8)The January goods trade deficit in the US jumped to a fresh record high at $107.6b. The estimate was $99.5b. Exports fell 1.8% m/o/m led by declines in auto’s and consumer goods while imports were higher by 1.7% driven by auto’s and food/beverage.
9)China’s February private sector weighted services PMI from Caixin fell to 50.2 from 51.4 and that was .5 pt below the estimate. Caixin also said cost pressures eased but of course pre invasion. As for the outlook, “Despite the recent slowdown in activity growth, businesses expressed stronger optimism for the year ahead, often linked to forecasts of a robust post pandemic recovery.”
10)The overboard covid policy of Hong Kong that is now overwhelming them with higher cases saw their February PMI fall to 42.9 from 48.9.
11)Singapore’s PMI fell to 52.5 from 54.4.
12)The February manufacturing PMI in Taiwan fell slightly but still at good level of 54.3.
13)South Korea said its February CPI rose 3.7% y/o/y, with a core rate up by 3.2%, both 2 tenths more than expected. That core rate increase is a 10 yr high.
14)CPI in Thailand was higher by 5.3% in January vs the estimate of up 4%. The core rate was more muted, up by 1.8% but almost 3 times the forecast.
15)The Eurozone February CPI rose 5.8% y/o/y, 2 tenths more than expected and up from 5.1% in January. The core rate accelerated to a 2.7% pace from 2.3% and that was one tenth more than forecasted. Energy prices led the headline rise with a 32% y/o/y spike. But even non energy industrial goods prices are picking up with a 3% rise. Service prices grew by 2.5% y/o/y.
16)The final February Eurozone manufacturing PMI print was 58.2 vs the initial one of 58.4 and down from 58.7 in January.
17)The Eurozone January PPI rose 30.6% y/o/y and 5.2% m/o/m.