1)June payrolls grew by 372k, 107k more than expected but mostly offset by a downward revision to the two prior months of 74k. The private sector added 381k jobs in June, as the government shed a few. Average hourly earnings rose .3% m/o/m as expected and 5.1% y/o/y but which we know remains well below the 8%+ pace of inflation. A 9% rise in average hourly earnings in leisure and hospitality led the way not surprisingly. Average weekly earnings rose by .3% m/o/m and 4.2% y/o/y. The percent of job leavers relative to the unemployed rose to 14% from 12.8% in May and 13.1% in April.
2)The AAA average gallon of gasoline fell for the 24th day in a row thru Thursday to $4.72, the lowest since early June.
3)The June ISM services index fell to 55.3 from 55.9 but that was better than the estimate of 54. Of the 18 industries surveyed, all saw growth vs 14 last month and compared with 17 in the two prior months. The ISM noted the drop in new orders and employment as responsible for the modest m/o/m decline and also said “Logistical challenges, a restricted labor pool, material shortages, inflation, the coronavirus pandemic and the war in Ukraine continue to negatively impact the services sector.”
4)There was another month of more than 11mm jobs available in May at 11.245mm but that is the 2nd month in a row of declines.
5)The US May trade deficit did fall to the lowest of 2022 at $85.5b as exports rose faster than imports in nominal terms.
6)China’s June services PMI jumped to 54.5 from 41.4 and that was better than the estimate of 49.6 “as the domestic Covid situation improved and containment measures were loosened. New orders also returned to growth, rising modestly overall while the downturn in foreign client demand softened notably.” Looking ahead, “firms remained upbeat in June. That said, the degree of confidence was little changed from May and remained below the series average.”
7)Japan’s services June PMI rose to 54 from 52.6 as “remaining domestic Covid restrictions were lifted.” The first print was 54.2. On pricing, “Greater demand for services and rising fuel and raw material prices contributed to a further increase in average input costs, which rose at a record pace. This pushed firms to raise prices charged for services at the quickest rate since October 2019.”
8)India’s June services PMI also rose m/o/m.
9)The important tech manufacturing hub that is Taiwan said exports in June rose 15.2% y/o/y as expected. Not surprisingly, the shipments of semi chips led the way. Imports were up by 19.2% but that is a moderation from the 27% increase and May and vs the estimate of up 25.5%.
10)The Eurozone June services PMI, along with the UK for June were both revised up slightly from the initial print seen a few weeks ago.
11)Germany reported better than expected May factory orders and industrial production figures notwithstanding the extreme challenges with the high cost and availability of energy. Their stats office said “The excess demand is likely to be due to the continuing acute shortage of intermediate products. Enterprises still have difficulties completing their orders as supply chains are interrupted because of the war in Ukraine and distortions persist that have been caused by the Covid-19 crisis.”
12)Central banks in Australia, Malaysia, Hungary, Poland and Romania all raised interest rates in order to counter inflation.
1)The negative in the BLS jobs data was in the household survey where jobs fell by 315k and the only reason why the unemployment rate stayed unchanged at 3.6% was because the labor force dropped by a similar amount, by 353k. The U6 rate did tick down by 4 tenths to 6.7% but also because of a big decline in the number of people working part time for economic reasons. The participation rate declined by one tenth to 62.2% and the employment to population ratio was down by 2 tenths to 59.9%. The participation rate for the important 25-54 yr category fell 3 tenths to 82.3% from 82.6% and that is the lowest since February. Hours worked held at 34.5 but was expected to rise to 34.6 and last month was revised down by one tenth.
2)Initial claims crept up by another 4k w/o/w to 235k, 5k more than expected. The 4 week average rose to 233k from 232k. Delayed by a week, continuing claims rose 50k to 1.375mm and that is quietly the highest since late April.
3)Fannie Mae said its June Home Purchase Sentiment Index fell 3.4 pts to 64.8, “its second lowest reading in a decade. Surveyed consumers continue to express pessimism about home buying conditions, with only 20% of respondents reporting it’s a ‘good time to buy a home’, while the percentage of consumers who believe it’s a ‘good time to sell’ fell from 76% to 68% this month.” Also of note, “a survey high 81% of consumers believe the economy is on the ‘wrong track’ and, for the first time in nearly 7 years, a plurality of respondents said it would be difficult to get a mortgage, potentially a function of elevated home prices and higher mortgage rates.”
4)The average 30 yr mortgage rate fell another 10 bps w/o/w but to a still relatively high level of 5.74% and mortgage apps resumed their declines. Purchase apps fell 4.3% w/o/w and are down 17.% y/o/y. Refi’s were lower by 7.7% w/o/w and by 78% y/o/y.
5)The June Logistics Managers’ Index fell 2.1 pts m/o/m to 65. For perspective, the long term average is 65.3 and this is the first time since July 2020 that it is below. The all time high was 76.2 seen just 3 months ago. The LMI said “The steep decline is reflective of what we have seen in the overall economy in the last three months, moving from the record-setting expansion of the last 18 months to the greatly subdued level of growth observed throughout Q2. We are also seeing a different type of growth now than we were previously. Up until 2022, we saw high demand for transportation and warehousing and difficulty building up inventories, June’s report is the opposite.” Inventories are up and transportation costs are down. It’s not all roses though as there is still a lot of congestion at the ports and which leads to the slow movement of goods deliveries. But the now a lot of this is excessive inventories still being shipped. LMI said “High levels of inventory are pervasive across multiple levels of the supply chain.” In turn, there is a lot of need still for warehousing space.
6)The price of natural gas in Europe rose another 15% this week after last week’s 14% rise.
7)Singapore’s June PMI slipped to 57.5 from 59.4. Markit said “Businesses continued to flourish, supported by strong demand and output growth which were among the highest in the series. That said, supply chain issues could start to constrain growth in Singapore’s private sector. Slight slowdowns in the growth of several indices were recorded in June with some panelists linking this to supply chain disruptions and shipping delays.” On the outlook, “Firms continue to stay hopeful regarding future growth as indicated by the improvement in business confidence recorded in June.”
8)So sad the news on Shinzo Abe, the longest serving Japanese Prime Minister ever who took bold steps ten years ago with his ‘three arrows’ agenda to try to get the Japanese economy out of its post bubble rut.