1)May payrolls rose by 390k, above the estimate of 318k, partly offset by a 22k downward revision to the two prior months. The private sector added 333k of this, 32k more than expected and thus government workers contributed the most to the upside. The household survey said 321k jobs were added and when combined with a similar 330k person increase in the labor force, the unemployment rate held at 3.6% for a 3rd straight month. The pre covid low was 3.5%. The U6 figure was 7.1% vs 7% last month. Average hourly earnings rose .3% m/o/m for a 2nd month but that was one tenth less than expected. Due to rounding though, the y/o/y gain of 5.2% was as expected and is the 7th month in the past 8 with a 5 handle. Unfortunately however inflation has an 8 handle. Hours worked totaled 34.6 as expected. The participation rate was 62.3% vs 62.2% in April and vs 62.4% in March. The important 25-54 yr old cohort saw a rise in the participation rate to 82.6% from 82.4% and almost back to the 83% seen in February 2020. Bottom line, the private sector job add of 333k was just above the estimate and the 3 month average now is 374k which compares with the 6 month average of 480k, the 12 month average of 521k and the 2021 average of 524k.
2)Initial jobless claims fell to 200k from 211k last week and 10k below the forecast. The 4 week average was little changed at just under 207k vs 207k last week. Delayed by a week, continuing claims fell to a fresh 50+ yr low at 1.31mm.
3)The May ISM manufacturing index rose to 56.1 from 55.4 in April. That was 1.6 pts above the estimate and the May print compares with 57.1 seen in March and 58.6 in February. Notwithstanding the headline improvement from April, the breadth softened as 15 industries saw growth vs 17 in April and 15 in March. ISM said demand improved but consumption softened due to “labor force constraints.” Also, “Overseas partners’ disruptions are beginning to impact US manufacturing, creating a near term headwind for factory output growth. Ten percent of panelists’ general comments expressed difficulty obtaining material from their Asian partners, which will impact reliable deliveries in the summer months.”
4)The May Conference Board consumer confidence index was 106.4, just above the estimate of 103.6 but still down from 108.6 in April. It started the year at 115.2 and was 132.6 in February 2020 and bottomed at 85.7 in April 2020. Both key components, the present situation and expectations, fell m/o/m. One yr inflation expectations fell one tenth from April to 7.4%. It peaked at 7.9% two months ago but remains well above the 5 yr average of 5.5% and the 4.5% it stood at in February 2020. The answers to the labor market questions did soften. Those that said jobs were Plentiful fell 3 pts to the lowest since May 2021. Those that said jobs were Hard to Get was up 2.4 pts to an 8 month high. Spending intentions on major items weakened again. Not surprisingly the bottom line from the Conference Board said “inflation remains top of mind for consumers, with their inflation expectations in May virtually unchanged from April’s elevated level. Looking ahead, expect surging prices and additional interest rate hikes to pose continued downside risks to consumer spending this year.”
5)The number of job openings in April (thus somewhat dated data) totaled 11.4mm vs 11.9mm in March (revised up by 400k). That marks the 6th month in the past 7 above 11mm but we’ve likely seen the top. The pace of hiring’s is already slowing as seen with the 4th month in the past 5 of declines. The quit rate remained unchanged at 2.9%.
6)China’s state sector weighted services PMI for May rose to 47.8 from 41.9. The manufacturing PMI was up 2.2 pts m/o/m to just under 50 at 49.6.
7)Singapore said its May PMI rose to 59.4 from 56.7 and that is a record high as the country is reopened. Markit said “The consumer services sector, in particular, exhibited strong signs of rebound across measures of demand, output and business sentiment.” The caveat though is not a surprise, “Supply issues persisted with reports of longer lead times and higher input price inflation recorded on the back of shortages, all of which led to further accumulation of backlogged work.”
8)Vietnam’s manufacturing PMI was up 3 pts to 54.7 (likely benefiting from production challenges in China).
9)The Bank of Canada hiked interest rates by 50 bps to 1.50% as expected.
1)ADP said just 128k private sector jobs were added in May, well less than the estimate of 300k and companies with under 50 employees saw job losses for a 2nd straight month.
2)Gasoline on Memorial Day 2022 was $4.62 a gallon, this compares with Memorial Day’s in the previous 5 years of $3.05, $1.96, $2.83, $2.97, and $2.37.
3)US vehicle sales in May totaled 12.68mm, a full 1mm below expectations and compares with 17mm in May 2021 and vs 14.3mm last month. It was 12.21 in May 2020. Normal should be 17-18mm.
4)The May ISM services index fell to 55.9 from 57.1 and that was below the forecast of 56.5. The internals were mixed. New orders rose 3 pts but only after falling by 5.5 pts in April. Backlogs declined by 7.4 pts to 52 and that is the least since March 2021. Inventories fell 1.3 pts to 51, a 3 month low so while we hear stories about excessive inventories at retail for certain items, it is not YET widespread it seems. Employment got back above 50 at 50.2, up .7 pts but it fell by 4.5 pts last month. Export orders got back what it lost in April (but not all service businesses have exports). Supplier deliveries eased again, down 3.8 pts to 61.3 and price paid moderated by 2.5 pts but still is above 80 at 82.1, was at an all time high in April and all 18 industries surveyed paid higher prices. Overall breadth also softened with 14 of 18 industries seeing growth vs 17 in the two prior months and vs 14 at the heart of omicron in February. The ISM said “Covid continues to disrupt the services sector, as well as the war in Ukraine. Labor is still a big issue, and prices continue to increase.” I question the covid blame if its not related to China and getting supplies.
5)The S&P CoreLogic national home price index in March saw a rise of 20.6% y/o/y, the quickest in this cycle and that is on top of a 13.5% y/o/y rise in March 2021.
6)Apartment List released its June National Rent Report and said rents were up 1.2% in May from April and that is the largest increase year to date. “So far this year, rents are growing more slowly than they did in 2021, but faster than the growth we observed in the years immediately preceding the pandemic.” Year to date rents are up 3.9%, only 5 months in and are higher by 15.3% y/o/y vs 17.8% at the beginning of the year. Vacancy was up slightly to 5% “but remains well below the pre-pandemic norm.”
7)While the average 30 yr mortgage rate fell 13 bps w/o/w to 5.33% coincident with the drop in the 10 yr yield, refi’s fell another 5.4% w/o/w and are down 75% y/o/y. Purchases fell .6% w/o/w and are lower by 14.2% y/o/y. The purchase index is at the lowest level since May 2020.
8)The selloff in European bonds this week must not be ignored.
9)Ahead of next Thursday’s ECB meeting, CPI in the Eurozone for May rose 8.1% y/o/y, more than the estimate of up 7.8%, vs 7.5% in April and was up .8% m/o/m. Stripping out food and energy saw a 3.8% gain, two tenths more than expected and vs 3.5% in April.
10)Eurozone April PPI was up 1.2% m/o/m and 37.2% y/o/y.
11)The May Eurozone services PMI was revised down slightly to 56.1 from the 1st look of 56.3. That compares with 57.7 in April and 55.6 in March. A full reopening certainly helped but “there was a further steep rise in operating expenses, leading firms to increase prices for the provision of services across the euro area at a sharp pace. Overall, the rate of output price inflation was the 2nd fastest on record behind April’s peak.”
12)The Eurozone May manufacturing PMI was revised to 54.6 from its initial print of 54.4 but down from 55.5 seen in April. Markit said “Euro area manufacturers continue to struggle against the headwinds of supply shortages, elevated inflationary pressures and weakening demand amid rising uncertainty about the economic outlook. However, the manufacturing sector’s deteriorating health has also been exacerbated by demand shifting to services, as consumers boosts their spending on activities such as tourism and recreation.”
13)The UK manufacturing PMI for May was left unchanged at 54.6 as expected vs 55.8 in April. That’s the lowest since January 2021. Markit said “Factories are reporting a slowdown in domestic demand, falling exports, shortages of inputs and staff, rising cost pressures and heightened concern about the outlook given geopolitical uncertainties.”
14)Switzerland, the home of the deepest negative rate central bank policy at -.75%, saw its May CPI rise 2.7% y/o/y vs 2.3% in the month prior. That’s the fastest rate of change since September 2008.
15)Germany said the number of unemployed fell by 4k in May but that was not as much as the estimate of a decline of 15.5k. Their unemployment rate though did hold at 5% which is just one tenth off the lowest since reunification. The Federal Labor Agency said “Employment continues to increase and the demand for new workers remains at a very high level. However, the Russian war against Ukraine and supply bottlenecks are denting the outlook.”
16)The Bank of Korea has been hiking over the past year to 1.75% and they will continue to do so after a 5.4% y/o/y May CPI print was seen today, 3 tenths more than expected and the core rate was higher by 4.1%, 4 tenths above the estimate.
17)China’s Caixin private sector focused May manufacturing PMI rose to 48.1 from 46 but that was 1 pt under the estimate. Caixin said “Covid outbreaks in several regions across China continued to weigh on the economy. But the rate of contraction in manufacturing was lower than the previous month.” The also said “The measure for new export orders remained in contractionary territory for 10 consecutive months in May as Covid outbreaks continued to impact transportation and logistics.” Input price pressures remained high but “the gauge of output prices fell into negative territory, dropping to its lowest since April 2020 due to weak market demand.” As for the business outlook, “While many firms were confident of a strong post pandemic recovery, others cited concerns with over the time it will take to contain the virus as well as the Ukraine war.”
18)Taiwan’s May manufacturing PMI fell to 50 from 51.7. Japan’s dropped to 53.3 from 53.5. Declines from April were also seen in Malaysia and Philippines. Australia’s declined to 55.7 from 58.8.