Positives
1)The BLS said 2.5mm jobs were added in May after the huge self inflicted job losses seen in the prior months. The estimate was for another loss of 7.5mm and the BLS said “These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus pandemic and efforts to contain it. In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade.” The prior two months were revised lower by 642k and the birth/death model added added 345k jobs which in reality was most likely down sharply. The unemployment rate fell to 13.3% from 14.7% as the household survey said 3.8mm jobs were added combined with a labor force increase of 1.7mm. The caveat is that the all encompassing U6 rate is still very elevated at 21.2% vs 22.8% last month. Either way and stated simply, we lose jobs when the economy forcibly shuts down, we add many back as we reopen. The question now is to what extent will businesses reopen and how many jobs are brought back.
2)The May ISM services index rose to 45.4 from 41.8 in April. That was 1 pt above the estimate with 50 being the breakeven. Notwithstanding what the BLS said, Employment was little changed at 31.8 from 30 in April and 47 in March with zero industries adding to payrolls, notwithstanding the reopenings. The breadth of expansion is still poor as just 4 industries saw growth vs 2 in April. 14 industries saw a contraction vs 16 last month. The bottom line from ISM was simply “Respondents remain concerned about the ongoing impact of the coronavirus. Additionally, many of the respondents’ respective companies are hoping and/or planning for a resumption of business.”
3)According to the MBA, purchase applications continue to power on, rising 5.3% m/o/m and now has it higher by 17.5% y/o/y.
4)As more of China has reopened, its private sector weighted Caixin services PMI rose to 55 from 44.4 and that was well better than the estimate of 47.3. Caixin said “both business activity and new orders expanded at the quickest rates since late 2010. However, the pandemic continued to have a detrimental impact on new export work, which fell sharply…Confidence regarding the year ahead remained strong overall, despite weakening since April.”
5)China’s private sector weighted Caixin manufacturing PMI got back above 50 at 50.7 from 49.4. Caixin said “The easing of restrictions related to the coronavirus disease pandemic led to a stronger rise in Chinese manufacturing output in May, with the rate of expansion the quickest for over 9 years. However, demand conditions remained subdued, largely due to a notable fall in export orders. As a result, firms continued to trim staff numbers and raised their buying activity only slightly. A lack of new work also led to the first reduction in backlogs of orders since February 2016.” As for the outlook, “Business confidence picked up in May, with firms generally optimistic that output will rise over the next year. Positive forecasts were often linked to hopes of a global economic rebound once the pandemic situation improves.”
6)Japan’s May services PMI rose 5 pts m/o/m but still only to 26.5, about half its pace in January. Australia’s services PMI jumped 7.4 pts but only after falling by 29.5 pts in the past two months. Hong Kong’s PMI was up 7 pts to 43.9, helped by China’s reopening. India’s services PMI more than doubled m/o/m but to only 12.6.
7)With manufacturing PMI’s, we saw rebounds in India to 30.8 from 2.74, Thailand to 41.6 from 36.8, Vietnam to 42.7 from 32.7, Malaysia to 45.6 from 31.3 and the Philippines to 40.1 from 31.6.
8)The Reserve Bank of Australia kept rates at a record low of .25% but highlighted the green shoots. “It is possible that the depth of the downturn will be less than earlier expected. The substantial, coordinated and unprecedented easing of fiscal and monetary policy in Australia is helping the economy through this difficult period…The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely. And there are signs that hours worked stabilized in early May, after the earlier very sharp decline. There has also been a pick up in some forms of consumer spending.”
9)The Eurozone services PMI was revised to 30.5 from the initial print of 28.7 and up from an extraordinarily depressed 12 in April. I believe Markit’s bottom line applies everywhere, “Providing there is no resurgence of infection numbers, the planned lifting of lockdowns will inevitably help boost business activity and sentiment further in coming months. However, the outlook is scarred by the prospect of demand remaining weak due to household spending being hit by high levels of unemployment and corporate spending being subdued as companies repair balance sheets.”
10)The final read of the Eurozone’s manufacturing PMI was left essentially unchanged with the initial at 39.4 which is up 6 pts from April but compares with 49.2 back in February.
11)The UK services PMI for may was revised to 29 from 27.8 initially and that is a sharp rebound from the closed down 13.4 print in April and compares with 34.5 in March.
12)The UK manufacturing PMI final print was 40.7 vs the initial one of 40.6 and that is up 8.1 pts from April. It was 51.7 in February before the shutdown.
13)The NBA owners approved a July 31st resumption of the NBA season. We await the Players Association to vote today.
Negatives
1)While not nearly as bad as feared, ADP said 2.76mm private sector jobs were lost in May after a decline of 19.56mm in April.
2)Initial jobless claims totaled 1.877mm, a touch above the estimate of 1.833mm but down from 2.126mm last week. It’s the 9th straight week of moderation but still remains at very high levels. The trend will continue to slow as things reopen. Continuing claims, delayed by a week, were 21.5mm, up from 20.8mm in the week prior.
3)The May ISM manufacturing index rose to 43.1 from 41.5 but that was .7 pts below the estimate and vs 49.1 in March. In terms of breadth, 6 industries out of 18 surveyed saw growth vs 2 in April and 10 in March. 11 saw a contraction vs 15 in April. The ISM’s bottom line was on target by saying “The coronavirus pandemic impacted all manufacturing sectors for the 3rd straight month. May appears to be a transition month, as many panelists and their suppliers returned to work late in the month. However, demand remains uncertain, likely impacting inventories, customer inventories, employment, imports and backlog of orders.”
4)Refi’s in contrast to purchases fell by 8.6% m/o/m but still remain up by 137%.
5)The ECB is now just blatantly monetizing all the fiscal spending in the Eurozone as they added 600b euros to their PEPP and is prepping to buy many of those bonds that will be issued to finance the upcoming 750b euro grant/loan program. I say blatant because after years of trying to lift growth and inflation, can anyone say with a straight face that more QE/NIRP will all of a sudden work. Maybe on inflation eventually but not on real growth.
6)German unemployment in May spiked by 238k, well more than the estimate of 190k. The unemployment rate rose to 6.3% from 5.8% and the main reason why it’s not much higher is because of the wage sharing program in place where the state covers all or part of employee wages so as to keep them on company payrolls until things improve.
7)Japan’s manufacturing PMI fell to 38.4 from 41.9. South Korea’s came in at 41.3 vs 41.6. Taiwan’s PMI fell to 41.9 from 42.2. Singapore’s PMI remained depressed at 27.1, down 1 pt m/o/m.
8)South Korea’s trade data remained very soft in May with exports falling by 23.7% y/o/y but slightly not as bad as the 25.1% expected decline. Imports were down by 21.1% y/o/y, a bit more than the forecast of a 20.6% y/o/y drop. The bright spot within the data was a 7.1% y/o/y rise in the shipments of semi’s and a 4% increase in exports to China if working days are adjusted. Exports to the rest of the world were soft.