1) Within the payroll report, Job Leavers as a percent of unemployed, a measure of those having confidence in leaving their market for greener pastures (aka, higher wages) rose to 14%, the highest since October 2000. Average hourly earnings rose by .4% m/o/m, double the estimate and the y/o/y gain was 2.9%, the best since April 2009. Average weekly earnings rose by 3.2% y/o/y and back near the upper end of the recent range. Hours worked were unchanged at 34.5. Employees are now getting a bigger piece of the profit pie.
2) The ISM services index for August rose to 58.5 from 55.7 in July and 59.1 in June and that was above the estimate of 56.8. The number of industries seeing growth remained the same at 16 of 18 surveyed. ISM said “There was a strong rebound for the non-manufacturing sector in August after growth ‘cooled off’ in July. Logistics, tariffs and employment resources continue to have an impact on many of the respective industries. Overall, the respondents remain positive about business conditions and the economy.”
3) The August US ISM manufacturing index jumped to 61.3 from 58.1 in July and that was well above the estimate of 57.6. This pace is now at the highest since May 2004. The fly was export orders which was down a hair, by .1 pts to 55.2 but that is the lowest level since October 2017. Notwithstanding the headline jump, the number of industries surveyed that saw growth fell to 16 from 17 of the 18 surveyed. The ISM summed up the report by saying “Demand is still robust, but the nation’s employment resources and supply chains continue to struggle. Respondents are again overwhelmingly concerned about tariff related activity, including how reciprocal tariffs will impact company revenue and current manufacturing locations. Panelists are actively evaluating how to respond to these business changes, given the uncertainty.”
4) With mortgage rates holding steady near 7 year highs, mortgage applications were little changed w/o/w. Purchase applications to buy a home rose .6% after falling by .9% last week week. The y/o/y gain is 2%.
5) Challenger, Gray said “Hiring announcements increased in August to 17,274, the highest total since February” with tech adding 7k of those.
6) French industrial production in July exceeded the estimates.
7) In the UK, their August services PMI did improve to 54.3 from 53.5 and that was better than the expected figure of 53.9. The business outlook though fell to the lowest since March, “which was attributed to political uncertainty and the unpredictable impact of Brexit on clients’ business operations” according to Markit.
8) In Europe, the August services PMI for the eurozone was 54.4 as expected, in line with the preliminary figure and up a touch from the 54.2 print in July. For comparison, the average this year is 55.2. The domestic, service side of the European economy has held up much better than the manufacturing side. However, Markit said “Geo-political trade tensions ensured that business expectations in the service sector were at their lowest for 21 months in August.”
9) Italian bond yields fall from multi year highs as the government soothes some fears they would run a budget deficit north of 3% of GDP.
10) Japan’s services PMI was up slightly to 51.5 from 51.3. Hong Kong’s was higher too but is still below 50 at 48.5 from 48.2 last month.
11) Manufacturing PMI’s rose m/o/m in South Korea, Australia, Malaysia and the Philippines.
1)In August, payrolls grew by 201k, 11k more than expected but that was completely offset and then some by the downward revisions of a combined 50k in the two prior months. According to the household survey, 423k jobs were lost but because the size of the labor force fell by 469k, the unemployment rate was unchanged at 3.9% vs the estimate of 3.8% but the all in U6 rate was down one tenth to 7.4% as the number of those NOT in the labor force rose to 96.3mm, a fresh record high. The participation rate fell by two tenths to 62.7%, matching the lowest since May 2016 and the employment to population ratio fell too. The number of employed persons working part time for economic reasons fell by almost 200k. And, the pool of available labor fell by 309k and is just above the lowest level since 2007. Manufacturing was the surprise with its decline of 3k, the first drop since July 2017 (trade worries showing up and/or reflects the difficulty in finding skilled labor?). Construction jobs grew by 23k which is contrast to the slowdown seen in the ADP report. Retail again shed jobs and there was a slowdown in the pace of hiring’s in leisure/hospitality. Trade/transport, where we know jobs are desperately needed, saw an increase of 37k, the best in 3 months. The pace of hiring has slowed slightly to a rate of 185k over the past 3 months from 192k over the past 6 months, and 194k over the past 12. The pace was 195k in 2016, 22k in 2015 and 250k in 2014.
2) In contrast to ISM, Markit’s measure of US services fell to a 4 month low. They said “Output growth softened to a four-month low and dipped below the long-run series trend. The rate of new business growth softened to an eight-month low, despite remaining strong overall. Subsequently, firms showed evidence of spare capacity with backlogs falling further and employment growth slowing to a seven-month low.”
3) In contrast to the highest level in 14 years seen in ISM, the Markit manufacturing PMI for August is at the weakest level since November. With respect to exports, Markit said “Exports remain the key source of weakness for producers, with foreign orders barely rising in August after 2 months of modest declines.” They said domestic demand is where the strength is. “Tariffs and trade wars were also commonly cited as factors behind companies building safety stocks of inputs to ensure supply or lock in lower prices, exacerbating supply shortages and also driving prices even higher.”
4) The MBA said refi’s fell 1.4% w/o/w and are down by 37% y/o/y.
5) In the Challenger, Gray monthly release of job cuts, there was a pick up in those related to the tariffs but mostly offset, for now, a pick up related to them. They said “Last month saw an increase in companies attributing job cuts to tariffs, specifically tariffs on imported steel, which are ongoing, and newsprint, which have recently been overturned. Companies announced 521 job cuts due to these tariffs in August, for a total of 591 so far this year…While tariffs have been blamed for cuts, U.S. steel makers announced plans to hire 359 workers in August.” As for the headline number of cuts, the announced plans were the most since March and were led by the Industrial Goods space with half the layoffs coming from Johnson Controls as part of a previously announced restructuring. Challenger said “Manufacturers are grappling with rising costs, weak demand, and competition on a global scale. We may see additional job cuts as the full ramifications of imposed tariffs are felt.”
6) The vehicle sales SAAR for August totaled 16.6mm, 200k less than expected and that is the slowest pace of sales since August 2017. “Average transaction prices are up for the industry, as most manufacturers reported gains from the sales mix continuing to shift from cars to SUVs,” Tim Fleming, analyst for Kelley Blue Book, said in a statement. Price inflation here and in housing is clearly impacting sales.
7) Chinese FX reserves in the midst of its currency weakness fell by $8.2b in August, mostly giving back the rise seen in the two prior months. The level of $3.11 Trillion was slightly below the estimate of $3.115 Trillion and that is the least since October but is still pretty steady all things considered in terms of the extent of the yuan weakness.
8) The private sector weighted Caixin Chinese services PMI for August to 51.5 from 52.8. That’s the weakest since October 2017. The manufacturing PMI fell by .2 pts to 50.6, the lowest since June 2017.
9) The Singapore PMI fell to 51.1 from 53, India’s slowed to 51.5 from 54.2 and Australia’s dropped to 51.8 from 52.3.
10) Manufacturing PMI’s fell m/o/m in Thailand, India, Vietnam and Taiwan.
11) Regular base pay in July in Japan rose 1% y/o/y. While that is down from 1.1% in June and 1.3% in May, it still is around 21 year highs. Bonus and overtime pay moderated.
12) Germany factory orders, industrial production and exports all were weaker than expected in July.
13) Spanish IP came below the forecast.
14) The Eurozone manufacturing PMI for August was left at 54.6 but that is the weakest since November 2016.
15) The UK manufacturing PMI fell to 52.8 from 53.8 and that was 1 pt less than estimated.
16) The Swedish Riksbank is finding itself stuck below water as they pushed out a move out of NIRP to possibly February instead of by year end.