1)Within the jobs report, the household survey saw a job gain of 442k and a large jump in the size of the labor force of 786k which resulted in a rise in the unemployment rate to 3.7% but for good reason. The U6 survey, also including discouraged workers and those working part time but want full time, rose 3 tenths to 7%. Also of note, ‘job leavers’ as a percent of the unemployed (capturing the quit rate essentially), rose to 15.2% from 14.8% in July, 14% in June and 12.8% in May. That was a level last seen in April 2000 and in 1990 before then. As part of the sharp rise in the labor force, the participation rate rose 3 tenths m/o/m to 62.4% and that matches the most since March 2020 when it was 62.7% and vs 63.4% in February 2020. Most importantly here, the participation rate for those aged 25-54 yrs old, the key working age range of the labor force, rose to 82.8% from 82.4% in July and that has now almost recaptured the covid drop as it was 83% in February 2020 and 83.1% in January 2020.
2)Initial jobless claims totaled 232k, 16k below expectations and last week was revised down by 6k to 237k. The 4 week average fell by 4k w/o/w to 242k. Continuing claims, delayed by a week, was as forecasted at 1.44mm vs 1.41mm in the week before and that’s the most since April.
3)The August ISM manufacturing index was unchanged m/o/m at 52.8 but that was above the estimate for a slight drop to 51.9. It does though remain at the lowest level since June 2020. The breadth of the expansion continues to soften as just 10 of the 18 industries surveyed saw growth. That is the least since May 2020 and 7 saw outright contraction. The concerns, “Panelists continue to express unease about a softening economy, with 18% of comments noting concern about order book contraction.”
4)The August Conference Board Consumer Confidence index rose to 103.2 from 95.3 and that was 5 pts better than expected and off the lowest since February 2021. For perspective, it was 132.6 in February 2020 and 85.7 by April 2020. Both main components were higher m/o/m. A main reason for the lift was lower inflation expectations and that is mostly because of lower gasoline prices. One year inflation expectations moderated to 7% from 7.4% in July and 7.9% in June. The answers to the labor market questions were mixed. After falling by 1.2 pts last month to the lowest since August 2015, plans to buy a home rose .9 pts. Plans to buy an automobile were little changed and for those for major appliances got back what it lost in July. There was a lift in vacation plans, to 44.8 from 36.3 in the last read. The bottom line from the Conference Board, “Concerns about inflation continued their retreat but remained elevated” and that helps to explain the bounce in confidence, albeit off depressed levels.
5)Apartment List released its September National Rent Report and said new rents in August rose .5% from July. That is half the gain seen in July but said “that follows a typical, pre-pandemic trend.” Rents year to date are up 7.2% vs 14.8% seen at this point last year. On a y/o/y basis they are still up 10%. Because of more supply, the vacancy rate did tick up to 5.1%. It was as low as 4.1% last fall but still remains under the pre-covid pace of 6-7%. Apartment List speculates this “to spiking mortgage rates that continue sidelining first time homebuyers and keeping more households renting for longer.”
6)While still rising robustly, the rate of change for home price increases slowed to an 18% pace in June according to S&P CoreLogic. They are still up an astonishing 40% over the past two years. Home prices in Tampa and Miami still saw 30%+ y/o/y home price gains, followed by Dallas, Phoenix, Charlotte and Las Vegas all above 25%. Home price gains were slowest in Minneapolis, DC (transient place because of the political turnover), Cleveland, Chicago, Detroit and NY.
7)Job openings in July totaled 11.2mm and June was revised up by about 300k to 11mm. This is now the 8th month in a row of 11mm job openings. The fly here is that hiring’s fell for a 5th month and the hiring rate was unchanged at 4.2% which matches the slowest since January 2021. The number of quitters fell for a 4th month and the quit rate fell to 2.7%, the lowest since May 2021.
8)Dutch TTF natural gas price fell 32% on the week to a 3 week low after rising by 24% last week. German power prices one yr forward fell by almost half after its 70% parabolic jump last week.
9)The UK manufacturing PMI was revised up to a still weak 47.3 from 46 preliminarily, from 52.1 in July. “There were reports of clients postponing, rescheduling or canceling agreements due to increased economic uncertainties, recession warnings, rising prices and component shortages, while port congestion and Brexit complications constrained export opportunities.”
10)The unemployment rate for the Eurozone fell to 6.6% in July, the lowest since data goes back to 1998.
11)The demand for labor continues to rise in Japan as seen by their July jobs to applicant ratio which rose to 1.29 from 1.27. No change was expected. That’s the highest since April 2020 when it was at 1.31 but still is down from 1.57 that it started 2020 at. Their unemployment rate held at 2.6% as forecasted.
12)South Korea reported a weaker than expected CPI print for August. It fell .1% m/o/m instead of rising by .3% as expected because of the fallback in energy prices and cuts in energy taxes. The y/o/y gain was 5.7% vs 6.3% in the month prior. The core rate though was about as expected, up 4.4%.
13)We saw a gain in manufacturing PMI’s in Thailand to 53.7 from 52.4, Indonesia to 51.7 from 51.3, the Philippines to 51.2 from 50.8.
14)Vietnam, the growing global manufacturing presence as companies diversify away from China, said exports in August grew by 22% y/o/y, well better than the estimate of up 17%. Imports also beat the forecast.
15)Some levity, //www.youtube.com/watch?v=D0sz1W1iZv0
1)Payrolls in August totaled 315k, just above the estimate of 300k but the two prior months were revised down by a total of 107k (with almost all from the June print). Average hourly earnings rose .3% m/o/m after a .5% rise in July. That was one tenth less than expected. Pay in leisure/hospitality still is leading the way with a .5% m/o/m increase and by 5.7% y/o/y, although this is a moderation as comps get tough. Transportation and warehousing and Information jobs (tech) also saw similar pay raises. The fly was that hours worked fell one tick to 34.5 and combine this with hourly earnings saw average weekly earnings flat m/o/m but only after jumping by .8% in July. The y/o/y change of 4.6% was unchanged from last month.
2)After a drop in the S&P Global US manufacturing index to the lowest since July 2020, the chief economist there said its index was down for a 2nd month “with demand for goods having now fallen for 3 straight months amid the ongoing impact of soaring inflation, supply constraints, rising interest rates and growing economic uncertainty about the economic outlook. Barring the initial pandemic lockdown months, this is the steepest downturn in US manufacturing seen since the global financial crisis in 2009.” And then this, “Worryingly, the sharpest drop in demand was recorded for business equipment and machinery, which points to falling investment spending and heightened risk aversion. Similarly, payroll growth slowed close to stalling, reflecting a growing reticence to expand workforce numbers in the face of a deteriorating demand environment.”
3)Auto sales for August totaled 13.18mm at a seasonally adjusted annual rate. That was just under the estimate of 13.3mm and down from 13.35mm in July and compares with 13.06mm in August 2021. It averaged 16.9mm in 2019.
4)With a 15 bps rise in the average 30 yr mortgage rate to 5.80%, mortgage apps fell almost 4% w/o/w. Refi’s dropped by 8% w/o/w and by 83% y/o/y. Purchase apps declined for a 4th straight week, by 1.8% and are 23% below last year’s level.
5)FreightWaves said their Outbound Tender Rejection Index reached a new cycle low this week at 5.43%.
6)While not unexpected, the UK announced that the cap on electricity bills will rise to 3,549 pounds in October from the current level of 1,971 pounds. At current spot rates, this could go above 6,000 pounds next year if things don’t change. Last October, the cap stood at 1,277 pounds.
7)The August Eurozone headline CPI was up 9.1% y/o/y from 8.9% in July and that was one tenth more than expected. The core rate accelerated to 4.3% from 4% and was 2 tenths above the estimate.
8)The Eurozone July PPI rose 38% y/o/y, just above the estimate. Ex energy, wholesale prices were still up by 15.1% y/o/y.
9)The Eurozone August manufacturing PMI was tweaked lower in its revision to 49.6 from 49.7 initially and vs 49.8 in July. S&P Global said “Weak demand conditions were a major drag on goods producers in August, reflecting deteriorating purchasing power across Europe amid high inflation. Manufacturers subsequently cut their buying activity back further in response to the darkening economic outlook, although the reduced need for inputs helped lower the strain on suppliers.”
10)Not surprisingly in light of the dangerous energy squeeze, August Economic Confidence in the Eurozone fell to 97.6 from 98.9 and that matches the weakest since January 2021. The manufacturing component has fallen all the way down to 1.2. It was 9 in March and 13.2 in January. The services component hung in because of the lift we’ve seen in leisure/hospitality spending but it too softened to 8.7 from 10.4. It was 11 in January. Consumer confidence was a bit less bad while retail and construction confidence improved a touch.
11)Germany said the number of unemployed rose by 28k in August, about as expected and their unemployment rate rose one tenth to 5.5%. It’s the 3rd straight month of increases after a long string of declines after the initial covid shutdowns in 2020.
12)China locks down another major city of 21mm people.
13) China said its August state sector manufacturing and services PMI fell to 51.7 from 52.5 with manufacturing below 50 at 49.4 and services at 52.6.
14)China also reported that the August Caixin private sector manufacturing PMI fell to 49.5 from 50.4.
15)Other PMI’s: Taiwan weakened all the way down to 42.7 from 44.6. South Korea’s fell to 47.6 from 49.8. Japan’s declined to 51.5 from 52.1 and Australia’s to 53.8 from 55.7. Malaysia slipped a touch to 50.3 from 50.6 as did India’s to 56.2 from 56.4.