1)Offsetting somewhat the big jobs disappointment was the increase in hours worked to 35 from 34.9 which matches the most since at least 2006 that I have data on. Also, the participation rate ticked up by 2 bps to 61.7%, matching the highest since March 2020 although remains well below the 63.4% print in January 2020. The employment to population ratio rose to 57.9% from 57.8%, higher for the 4th straight month, but still below the 60% level pre covid. Average hourly earnings rose .7% m/o/m, well above the estimate of no change and comes after a one tenth drop in March. Combine this with the hours worked and average weekly earnings rose by 1% m/o/m, the most since at least 2006 that I have data on not including the one time spike last year.
2)ADP said a net 742k private sector jobs were added in April, and while 108k less than expected about half was offset by an upward revision of 48k to 565k for March and was clearly better than what the BLS said. By company size the pace of job growth was evenly distributed with small businesses in particular contributing 235k jobs. ADP said “Service providers have the most to gain as the economy reopens, recovers and resumes normal activities and are leading job growth in April.”
3)In response to the difficulty in finding labor, the NFIB said wage intentions are rising. Current comp plans rose 3 pts m/o/m to 31%, matching the highest since February 2020 and future comp plans were higher by 3 pts to 20%, the highest since January 2020.
4)Initial jobless claims fell to 498k from a revised 590k last week (revised up from 553k) and while that was 40k less than expected, it’s basically a push when including that revision. The 4 week average fell to 560k from 621k as a print of 742k fell out. PUA fell to 101k from 121k. Delayed by two weeks, continuing PUA declined by 112k to 6.86mm and continuing claims for the emergency kind dropped by 222k to 5.19mm.
5)The final tally of US auto sales for April was a solid 18.51mm, well more than the estimate of 17.6mm
6)Productivity in Q1 grew by 5.4% q/o/q annualized, above the estimate of up 4.3% as companies try to produce all they can to meet strong demand with the labor that they have. Unit labor costs fell a less than expected .3% after the 5.6% gain in Q4. Versus Q1 2020, productivity was up by 4.1% and by 1.6% for unit labor costs.
7)China’s exports in April jumped by 32.3% y/o/y, above the estimate of up 24.1%. Imports grew by 43.1% vs the forecast of 44%.
8)The private sector weighted Caixin April services PMI in China rose 2 pts m/o/m to 56.3 and that was 2.1 pts better than expected. And, the outlook remained pretty positive. “Although easing from March’s recent record, optimism around the 12 month business outlook remained marked, partly driven by expectations that business conditions at home and abroad will continue to recover from the pandemic.” On inflation, Caixin said this: “Prices charged by services companies also rose in April, though to a lesser extent than that seen for input costs. A number of businesses mentioned raising their charges to help ease pressure on margins, while others indicated that stronger client demand had enable them to raise their prices.”
9)Japan’s services PMI was revised up to 49.5 from 48.3 in March and that is the closest to 50 since January 2020. Markit said “The loosening of Covid restrictions at the end of March also led to a broad stabilization of incoming business as firms continued to adjust to operating under softer containment measures.” Hiring intentions also improved. While there has been some new selective restrictions of late in the Tokyo area, “businesses were optimistic that the Olympic Games and a successful vaccination program would stimulate a broad economic recovery.”
10)Australia’s April PMI services index was kept little changed at 58.8 from its initial read of 58.6. That is up from 55.5 in March. Australia’s manufacturing PMI was revised to 59.7 from 59.6 and that is up from 56.8 in March.
11)The manufacturing PMI in Thailand got back above 50 at 50.7 from 48.8 in March. Hanging in there notwithstanding the tragic situation in India was their services PMI which was 54 vs 54.6. Taiwan’s rose to 62.4 from 60.8. Malaysia’s was up to 53.9 from 49.9. India’s held in at 55.5 vs 55.4 in March.
12)Germany’s factory orders, IP and trade data in March all exceeded expectations.
13)The Eurozone April services PMI was revised to 50.5 from the 1st print of 50.3 a few weeks ago. That’s the 1st time above 50 since last August. Markit said “There was some notable divergences in performance by country. Whereas Spain registered a marked rise in activity, Germany and Italy experienced contractions. Marginal growth was seen in France.” With the vaccine rollout picking up speed, expect these numbers to improve in the months ahead and Markit said this to that, “increasing confidence about the future led to a strengthening of business expectations to their highest level since May 2017.”
14)The UK April services PMI was revised to 61 from the 1st print a few weeks ago of 60.1. That is up from 56.3 in March and Markit said “April data illustrates that a surge of pent up demand has started to flow through the UK economy following the loosening of pandemic restrictions, which lifted private sector growth to its highest since October 2013.” This was led not surprisingly by leisure and hospitality. The inflation commentary was this: “Inflationary pressures remained a concern for service providers in April, with higher staff costs, transport bills and raw material prices all adding to business expenses. The overall rate of input cost inflation was the fastest since February 2017, which resulted in another strong increase in average prices charged for business and consumer services.”
15)The April UK manufacturing PMI was revised slightly higher to 60.9 from the initial print of 60.9 a few weeks ago. That’s up 2 pts from March and Markit said this: “Growth of output and new orders were both among the best seen over the past 7 years, leading to a solid increase in employment. The sector remained beset by supply chain delays and input shortages, however, which contributed to increased purchasing costs and record selling price inflation.”
16)Eurozone retail sales in March were better than expected.
17)Responding to changing conditions, the BoE repeated that QE will end by year end. The Norges Bank reiterated that they will be raising rates by year end. The Brazilian central bank hiked rates by 75 bps to 3.5%. Another ECB member talked about possibly slowing down the pace of its PEPP program this summer. Robert Kaplan in the US remains the lone wolf on his desire to begin the tapering process.
1)I’ll repeat again my belief that the US decision to waive IP protection for covid vaccines and other drugs is terrible for many reasons with major long term implications.
2)The BLS said a net 266k jobs were created in April, quite different than the expectations of a 1mm plus and the two prior months were revised down by 78k. The private sector added just 218k. Yes, seasonal adjustment issues could be at play here but so are supply challenges too. The household survey said a net 328k jobs were gained and when compared to the rise in the labor force of 430k, the unemployment rate rose to 6.1% from 6%. Positively though, the U6 all in rate fell to 10.4% from 10.7% and that is the lowest since March 2020.
3)Fed members that are relying on the number of people unemployed relative to the figure pre covid and the employment to population ratio in gauging ‘substantial progress’ towards their goals are making a big mistake by not instead focusing on the growing supply, demand imbalances in the labor market where the problem is with the former and not the latter.
4)Delayed by a week, continuing claims rose by 37k and at 3.69mm is 70k more than expected and a 3 week high.
5)The NFIB said that in April Positions Not Able to Fill rose to another fresh 48 year high.
6)The April ISM services index fell 1 pt m/o/m to 62.7 and that was below an expected increase to 64.1. We’re still talking though the 2nd best read since this survey began in 1997. Of the 18 industries asked, 17 saw growth vs 18 in March and 17 in February. For the 2nd month, all 18 saw an increase in prices paid and 17 of 18 saw slower supplier deliveries. The only industry that saw a contraction was in Ag, Forestry, Fishing & Hunting but only because of things like this, “Delays in container deliveries are now impacting our business” according to one respondent. ISM said this: “Respondents’ comments indicated that pent up demand is continuing. Production capacity constraints, material shortages, weather and challenges in logistics and human resources continue to affect deliveries, which has resulted in a reduction of inventories.”
7)The April ISM manufacturing index fell to 60.7, down 4 pts from March and that was well below the estimate of 65 because of the major supply problems. All 18 industries surveyed saw growth in the month but the reason for the m/o/m decline in this index is that things are almost too good relative to the ability of businesses to deliver as “companies and suppliers continue to struggle to meet increasing rates of demand due to Covid impacts limiting availability of parts and materials. Recent record long lead times, wide scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy. Worker absenteeism, short term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing growth potential.”
8)With little change w/o/w in the average 30 yr mortgage rate at 3.18%, the MBA said purchases fell by 2.5% from last week. This is the 5th decline in the past 6 weeks and there is no question that a combination of little inventory and high prices are weighing on the pace of transactions. That said, they are still up 24% y/o/y but off easy comps. Refi’s were little changed w/o/w and are down 17% y/o/y.
9)With another set of limited restrictions in place for a few weeks, Singapore’s April PMI fell to 51.8 from 53.5. “That said, business expectations remained strongly positive in April. Hopes around the vaccine distribution and a continued recovery from Covid both contributed towards private sector firms expressing greater optimism in their outlook in April.” As tourism is a key contributor to growth, “The travel bubble to commence with Hong Kong represents a step in the right direction.”
10)In Hong Kong, its April PMI was little changed at 50.3 vs 50.5. Looking ahead looks better, “Hopes that the recent signs of the pandemic being brought under control will continue, alongside more people being vaccinated and the further loosening of restrictions, supported confidence in the 12 month outlook for business activity. Moreover, optimism reached the highest since February 2014.”
11)South Korea’s manufacturing PMI for April slipped to 54.6 from 55.3. The Philippines fell to 49 from 52.2.
12)The April Eurozone manufacturing PMI was revised slightly lower to 62.9 from the initial print a few weeks ago of 63.3. The estimate was for no change. Markit this on cost pressures businesses are facing. “April saw average lead times for the delivery of inputs deteriorate to a degree unsurpassed in the survey’s history. A mismatch of supply and demand, allied with ongoing challenges in transportation networks, especially for sea freight, were widely reported as causal factors. Product shortages subsequently helped to drive input prices up at a rate beaten only once in the survey history (February 2011). Chemicals, metals, and plastics were amongst those inputs reported to be up in price and this led, alongside with growing confidence in the outlook, to companies raising their own charges to the strongest degree in over 18 years of data availability.”