1)ADP said a net 978k private sector jobs were added in May, well more than the estimate of 650k but partly offset by an 88k downward revision to April to 654k. The job distribution by business size was well balanced. ADP said “While goods producers grew at a steady pace, it is service providers that accounted for the lion’s share of the gains, far outpacing the monthly average in the last six months. Companies of all sizes experienced an uptick in job growth, reflecting the improving nature of the pandemic and economy.”
2)As expected, initial jobless claims fell to 385k from 405k last week. The 4 week average fell to 428k from 459k. Those filing PUA declined to just 76k from 94k. Delayed by two weeks, those still receiving continuing PUA fell by 147k.
3)The ISM services index rose to 64 from 62.7 and that was just above the estimate of 63.2 and is at a record high. All 18 industries surveyed saw growth in the month. And ISM said this: “The rate of expansion is very strong, as businesses have reopened and production capacity has increased. However, some capacity constraints, material shortages, weather related delays, and challenges in logistics and employment resources continue.”
4)The May ISM manufacturing index rose .5 pt to 61.2, about as expected. ISM summed up the month by saying “The manufacturing economy continued expansion in May. Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing levels of demand. 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.” On labor, “Worker absenteeism, short term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing growth potential.”
5)The Federal Reserve surprisingly has decided to liquidate its corporate bond portfolio illegally accumulated last year rather than wait for it to roll off via maturity.
6)China said its state sector weighted manufacturing and services composite PMI for May rose to 54.2 from 53.8 with manufacturing up slightly and services down a hair. Price pressures grew further as input prices in manufacturing rose by 6 pts m/o/m and by 3.3 pts for output prices. Within services, both were higher as well.
7)The private sector Caixin manufacturing PMI was also little changed at 52 vs 51.9. Caixin said “Both domestic and overseas demand were strong and supply recovered steadily. The job market remained stable. Manufacturers stayed confident about the business outlook as the gauge for future output expectations was higher than the long term average. Inflation was still a crucial concern as prices continued rising.”
8)The Singapore May PMI rose to 54.4 from 51.8 “despite the reimposition of Phase 2 (heightened alert) restrictions.” But business confidence “weakened notably in May as firms grew less optimistic following the stricter rules reintroduced amid the spread of a new Covid variant in Singapore.”
9)Hong Kong’s PMI rose 2.2 pts m/o/m to 52.5 as they relaxed Covid restrictions at the end of April. “Notably, inflows of overseas orders improved in May including new business from Mainland China after a 3 yr hiatus, which were positive signs. That said, higher cost inflation arrived hand in hand with the expansion of economic activities.”
10)Australia’s manufacturing PMI was revised to 60.4 from 59.9 initially and vs 59.7 in April.
11)The Eurozone services PMI was left almost unrevised at 55.2 (1st print was 55.1) while the UK services PMI was revised up by 1.1 pts to 62.9 from 61 in April.
12)The May Eurozone manufacturing PMI was revised to 63.1 from the 1st print of 62.8. That compares with 62.9 in April. The UK manufacturing PMI was revised down by .5 pt but to a still good 65.6 and that is up sharply from the 60.9 in April.
13)Germany said the number of unemployed in May fell by 15k people, more than the estimate of down 9k. The unemployment rate held at 6%.
1)Net payrolls grew in May by 559k, below the estimate of 675k. The private sector contributed 492k of this vs the estimate of 610k. The two prior months were revised up by 27k. The household survey said 444k got employed and when compared with the 53k person drop in the size of the labor force, the unemployment rate fell to 5.8% from 6.1% and the all in U6 rate is now 10.2% from 10.4%. Hours worked held at 34.9 for a 3rd month which is just off a multi decade high as the participation rate remains low as it fell one tenth to 61.6% vs 63.3% pre Covid. The employment to population ratio rose one tenth to 58%. The pool of available workers fell to the lowest since last March. This in turn lifted wage growth where average hourly earnings jumped .5% m/o/m, more than double the estimate of up .2% and follows a .7% rise in April. And it was a jump in pay for leisure and hospitality workers that led this increase as they rose by 1.3% m/o/m for these people. Manufacturing wages rose .6% m/o/m and by the same amount for construction workers. Bottom line, after losing 22.4mm jobs last March and April, the economy has added back 14.8mm.
2)Continuing claims rose by 169k to 3.77mm. That is the most since mid March in the midst of a record high amount of job openings. Those still receiving emergency benefits rose by 102k.
3)While mortgage rates were little changed w/o/w, mortgage applications continued to soften. Purchases in particular fell by 3.1% w/o/w and are down by 1.6% y/o/y. This component now sits at a one year low. Refi’s fell by 4.6% w/o/w though are up 6% y/o/y but near the lowest level in 16 months.
4)Thanks to inventory issues, total vehicle sales in May totaled 16.99m at a SAAR, down from 18.5mm in April and vs the estimate of 17.3mm.
5)The Fed’s balance sheet reaches a new record high, rising by $32b on the week to a new total of $7.94 Trillion.
6)The Caixin China private sector focused services PMI for May fell to 55.1 from 56.3. The estimate was 56.2. Caixin said “After expanding in April, overseas demand shrank as the measure for new export business slipped into contractionary territory. Surveyed enterprises blamed the dip on the adverse effects of the pandemic overseas.” Also, “Inflationary pressure was enormous as price gauges continued to rise. both the measures for input costs and the prices service providers charged rose to their highest points of the year. Surveyed enterprises attributed the rise in input costs to growth in raw material, energy, labor and transportation costs. The increased costs and strong demand pushed up the prices service companies charged.” As for the overall outlook from here, “The sector remained optimistic.”
7)India’s services PMI plunged to 46.4 from 54 as “The intensification of the Covid crisis and associated restrictions suppressed domestic and international demand for Indian services.”
8)We did see m/o/m declines in most other manufacturing PMI’s in Asia mostly because of the supply issues. Here they are: South Korea 53.7 vs 54.6, Taiwan 62 vs 62.4, Thailand 47.8 vs 50.7, Malaysia 51.3 vs 53.9, Vietnam 53.1 vs 54.7 and India 50.8 vs 55.5. Japan’s was revised to 53 from 52.5 but that is still down from 53.6 in April.
9)The Eurozone said its producer price index rose 1% m/o/m in April after a 1.1% increase in March, a .5% rise in February, a 1.7% spike in January after a .9% jump in December.
10)After a 6 tenths m/o/m increase in April, the Eurozone CPI rose .3% in May, one tenth more than expected. Off an easy comp, the y/o/y gain was exactly 2% and the core rate was up .9% as forecasted.
11)German retail sales in April missed expectations but we can dismiss it due to the selective shutdowns in the back half of that month.