Positives
1)Payrolls expanded in February by 379k which is well above the estimate of 200k and the private sector contributed 465k jobs, also vs the estimate of 200k. The two prior months were revised up by 38k at the headline level. Hiring in leisure and hospitality led the way. The household survey revealed 208k jobs were added and when combined with the 50k person increase in the labor force the unemployment rate fell by one tenth m/o/m to 6.2%. The comprehensive U6 though was unchanged at 11.1%. The participation rate was unchanged at 61.4% while the employment to population ratio rose another tenth to 57.6%, the highest since March.
2)Initial jobless claims totaled 745k, about in line with the estimate of 750k and last week was revised up by 6k to 736k. This latest print is clean of the Texas weather damage. The 4 week average, smoothing everything out, was 748k vs 717k and vs 835k in the week prior. PUA was little changed at 437k vs 427k last week. Delayed by a week, continuing claims fell by another 124k to 4.3mm but as expected. Delayed by two weeks, those continuing to receive PUA fell by 192k to 7.33mm while those still receiving the emergency kind fell by 601k after a 1mm person rise in the week prior.
3)The average 30 yr mortgage rate jumped 15 bps on the week to 3.23%, the highest since July coincident with the jump in the 10 yr yield. Mortgage apps though were little changed but came after declines of note in the three prior weeks. Purchases rose 1.8% w/o/w after dropping by 21% in the three weeks before. Refi’s were up 1% w/o/w after falling by 19% in the three prior weeks. Versus last year, purchases are basically flat, up by 1% while refi’s are up 7.1%.
4)The February ISM manufacturing index rose to 60.8 from 58.7 which was two points more than anticipated and compares with 60.5 in December. The breadth of the growth remained the same with 16 of 18 industries surveyed seeing growth. ISM said “Manufacturing performed well for the 9th straight month, with demand, consumption and inputs registering strong growth compared to January. Labor market difficulties at panelists’ companies and their suppliers continued to restrict manufacturing economy expansion and will remain the primary headwind to production growth until employment levels and factory operations can return to normal across the entire supply chain.”
5) German factory orders in January rose 1.4% m/o/m, 9 tenths more than expected but comes after a 2.2% decline in December. Orders rose everywhere except within the German economy.
6)The unemployment rate in the EU in January was 8.1% for the 3rd straight month (revised from 8.3% in December). Job subsidization programs have kept it from rising higher than it would otherwise.
7)The Eurozone February services PMI was revised up 1 pt but to still well below 50 at 45.7, up a touch from 45.4 in January and vs 46.4 in December. From Markit, “Once again, all five nations recorded a drop in activity, led by Ireland and Spain. France and Germany recorded similarly marked falls in activity, with the latter experiencing its worst performance since last May.”
8)The final read of the Eurozone February manufacturing PMI was 57.9 vs the first print of 57.7 and that is up from 54.8 in January. Markit said, “Manufacturing is appearing as an increasingly bright spot in the eurozone’s economy so far this year…Producers are benefiting from resurgent demand for goods in both domestic and export markets, linked to post Covid recovery hopes driving renewed stock building and investment in business equipment and machinery, as well as improved consumption.” This though is coming with ever rising inflation pressures, as stated here many times. Markit said “The growth spurt has brought its own problems, however, with demand for inputs not yet being met by supply. Shipping delays and shortages of materials are being widely reported and led to near record supply chain delays. Prices paid for inputs are consequently rising at the fastest rate for nearly a decade, hinting at further increases in consumer price inflation in coming months, at least until supply and demand come back into balance.”
9)The UK’s services PMI was just under 50 at 49.5 about as expected and rebounding from the 10 pt drop in January.
10)The UK manufacturing index’s final read for February was 55.1 from 54.9 initially and up 1 pt from January. This growth was not easy to come by however as “The upturn of the UK manufacturing sector was constrained by supply chain disruption and rising cost pressure in February, keeping output growth only marginal despite a modest improvement in new order intakes…Input cost inflation accelerated for the 10th straight month in February and to its highest rate for over four years. Output prices subsequently rose at the fastest pace since January 2018.”
11)The preliminary February Eurozone CPI was as expected with a .9% y/o/y headline gain and a 1.1% core increase. This is right before the base effects kick in. Services inflation rose by 1.2% y/o/y vs 1.4% in January and .7% in December. Energy prices are getting less negative and will of course turn positive in coming months.
12)Hong Kong’s February PMI got back to 50 at 50.2 vs 47.8 in January. Singapore’s rose to 54.9 from 52.9. With Singapore, Markit said “February data indicates a strong improvement across Singapore’s private sector with robust expansions recorded in output and new orders. Further additions to inventory holdings also supported the rise in the headline PMI while employment rose slightly during the month.
13)Japan’s final services PMI read was 46.3, little changed with the 46.1 seen in January. Selective restrictions remain a drag but there is optimism about the future because of the vaccines and the Olympics. “Firms were at their most optimistic since January 2018.”
14)South Korea’s February manufacturing PMI index rose 2.1 pts m/o/m to 55.3. Taiwan’s held above 60 at 60.4 vs 60.2 in January.
15)Japan’s February manufacturing PMI was 51.4 vs 49.8 and Vietnam 51.6 vs 51.3.
16)Japan’s labor market improved in January with its jobs to applicant ratio rising to 1.10 from 1.05. The estimate was 1.06. The unemployment rate was 2.9%.
17)The US is up to 2mm shots a day.
Negatives
1)Softening the strong job gain was the drop in hours worked which fell to 34.6 from 34.9 and vs the estimate of 34.9 and that matches the lowest since April. Weather related? Maybe. Average hourly earnings rose by .2% m/o/m as expected and 5.3% y/o/y but when added to the decline in hours worked, average weekly earnings fell by .6% m/o/m. Though still are up by 5.9% y/o/y.
2)ADP said a net 117k private sector jobs were created in February, almost half the estimate of 205k while January was revised up by 21k to 195k.
3)The February ISM services index fell to 55.3 from 58.7 and that was below the estimate for no change. Prices paid rose further, by 7.6 pts to 71.8, the highest since September 2008. While the headline number fell, the breadth of the services economy improved with 17 industries seeing growth vs 14 in January. ISM concluded that “Respondents are mostly optimistic about business recovery and the economy. Production capacity constraints, material shortages and challenges in logistics and human resources are impacting the supply chain.”
4)Markit said this on pricing within its US services report: “Input costs rose further in February, amid hikes in supplier charges and wage bills. Some service providers also noted that higher PPE prices pushed up cost burdens. The rate of cost inflation quickened to the fastest since data collection began in October 2009. In response, service sector firms sought to pass on higher costs burdens to clients. The rate of charge inflation was the 2nd fastest on record.”
5)Vehicle sales in February totaled 15.67mm, down from 16.63mm in January and below the estimate of 16.0mm.
6)Retail sales in the eurozone in January plunged by 5.9% m/o/m, well worse than the estimate of down 1.4% but not really surprisingly considering the selective shutdowns.
7)The German employment report for February was light relative to expectations. The number of unemployed rose by 9k instead of falling by 10k as expected. The unemployment rate though did hold at 6% as forecasted.
8)China’s February manufacturing and services composite index, impacted by the holiday, fell to 51.6 from 52.8 with both components lower. The private sector Caixin measure of manufacturing slipped to 50.9 from 51.5. Caixin said “PMI data revealed a further, albeit softer, improvement in the health of China’s manufacturing sector in February. Notably, companies recorded slower rises in both output and new work for the 3rd month running. Firms often commented that the coronavirus disease pandemic weighed on demand and impacted business operations in the latest survey period. New export work declined for the 2nd month running, while raw material shortages and transport delays led to a marked lengthening of suppliers’ delivery times. Nonetheless, companies were strongly optimistic that output will rise over the next year amid hopes of a rebound in global economic conditions.”
9)China’s Caixin private sector weighted February services index fell to 51.5 from 52 but as expected.
10)Australia’s services PMI for February was revised down by .7 pts to 53.4 from its first print and that compares with 55.6 in January. “Businesses commented that the easing of broad Covid restrictions had boosted demand and activity, although noted that the brief tightening of restrictions in Victoria state had slightly dampened business conditions.”
11)Australia’s manufacturing index was 56.9 vs 57.2. Indonesia 50.9 vs 52.2, Thailand 47.2 vs 49, Malaysia 47.7 vs 48.9, India 57.5 vs 57.7, and the Philippines 52.5 vs 52.5.
12)I believe we are in a new interest rate regime in the sense that central bankers don’t have the same grip on the yield curve that they both want and have had.