U.S. Added 155,000 Jobs in November, Less Than Expected Labor Department data showed the U.S. added 155,000 jobs in November, lower than forecasts of 198,000. The unemployment rate held steady at 3.7% and wage growth was unchanged, with average hourly earnings rising 3.1%.
Total nonfarm payroll employment increased by 155,000 in November, compared with an average monthly gain of 209,000 over the prior 12 months.
The change in total nonfarm payroll employment for October was revised down from +250,000 to +237,000, and the change for September was revised up from +118,000 to +119,000. With these revisions, employment gains in September and October combined were 12,000 less than previously reported.
In November, manufacturing added 27,000 jobs, with increases in chemicals (+6,000) and primary metals (+3,000). Manufacturing employment has increased by 288,000 over the year, largely in durable goods industries.
The average workweek for all employees on private nonfarm payrolls decreased by 0.1 hour to 34.4 hours in November. In manufacturing, both the workweek and overtime were unchanged (40.8 hours and 3.5 hours, respectively). The average workweek for production and nonsupervisory employees on private nonfarm payrolls held at 33.7 hours. In November, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $27.35. Over the year, average hourly earnings have increased by 81 cents, or 3.1 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.95 in November [+3.2%]. (BLS)
Fed Weighs Wait-And-See Approach On Future Rate Rises Federal Reserve officials are considering whether to signal a new wait-and-see mentality after a likely interest-rate increase at their meeting in December, which could slow the pace of rate increases next year.
(…) “We need to be attuned to…the possibility that the U.S. economy could look very different in the first quarter, first half of 2019 than it does now,” said Dallas Fed President Robert Kaplan in an interview Thursday.
Restrained price pressures give the Federal Open Market Committee “and me, as a central banker, some latitude to be patient,” Mr. Kaplan said. He added, “There are times when the smartest thing you can do is turn over a few cards and do nothing.” (…)
Federal Reserve Chairman Jerome Powell compared the Fed’s policy strategy to walking into a living room when the lights suddenly go out. “What do you do? You slow down and you maybe go a little bit less quickly, and you feel your way more,” he said in a speech last week. “So under uncertainty of this kind, you be careful.” (…)
In a speech Thursday, Atlanta Fed President Raphael Bostic said the Fed was “within shouting distance” of a rate the central bank considers to be neutral, meaning it is neither so low that it fuels added economic growth nor so high that it slows growth down.
“I’m not seeing clear signs of overheating, nor am I seeing any indications of a material weakening in the macroeconomic data at the moment,” he said. In an environment when the economy is stable and rates are near neutral, he said, the Fed needs to “proceed cautiously, with a keen eye on the data.” (…)
Less than 12 months ago, the headlines were about synchronized world growth, inflation risks and rising interest rates. Now, Canada and Europe are near a recession and China is slowing further. U.S. inflation has also slowed measurably, running below 1.5% annualized in the last 3 months. The BOC and BOE have already become more dovish and the Fed is indicating it also should given the above and the fact that the U.S. economy is resting on the consumer with autos and housing already hurt by rising rates.
U.S. Productivity Revised Slightly Higher in Q3; Unit Labor Costs Lower
Output per hour in the nonfarm business sector was revised up to a 2.3% gain at a seasonally adjusted annual rate in Q3’18 (1.3% year-over-year), from the previously reported 2.2% increase. In Q2 productivity growth remained at a 3.0% rate. Third quarter output and hours worked were unrevised at 4.1% (3.7% y/y) and 1.8% (2.3% y/y) respectively.
Unit labor costs were revised substantially lower to 0.9% in Q3 from 1.2% and -2.8% in Q2 (was -1.0%). These changes decreased the third quarter year-on-year gain to 1.2% from 1.5%. These revisions were predominantly the result of slower compensation growth for both quarters: 3.1% (2.2% y/y) in Q3 and flat in Q2.
In the manufacturing sector, productivity was revised meaningfully higher to a 1.0% annualized gain Q3 (was 0.5%) and 1.4% y/y. The Q2 reading was unchanged at 1.2%. Output increased at an upwardly revised 4.1% pace in Q3 (3.6% y/y), while hours worked grew a slightly faster 3.1% (2.1% y/y).
Unit labor costs in the factory sector declined at a 1.2% rate in Q3 (-1.2% y/y), following a 6.1% drop. Compensation per hour edged down 0.2% (+0.2% y/y) after falling 5.0%.
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The unit labor cost indicator doesn’t suggest that wage growth is becoming a significant problem for US companies. (The Daily Shot)
U.S. Companies Feel the Pinch as Tariff Costs Start to Mount American companies that import products are paying record amounts in customs duties as more tariffs imposed by the Trump administration take effect.
Tariff collections topped $5 billion in October, according to data from the Treasury Department and from Census Bureau data analyzed and released by Tariffs Hurt the Heartland, a lobbying coalition of manufacturing, farming and technology groups. (…)
The amount of tariffs being paid by U.S. importers has doubled since May, including an increase of more than 30% from August to October, according to the data. The sum has risen through the year as steel and aluminum tariffs were applied to imports from a growing group of countries, then surged in October, which was the first full month in which U.S. tariffs were in place on a full $250 billion of imports from China. (…)
Tariffs are assessed to the U.S. importer of record, meaning U.S. companies that import items from China and the rest of the world directly are the initial parties responsible for paying.
While some importers will bear the cost of the tariffs themselves, others may be able to persuade their foreign suppliers to cut prices enough to offset the cost and others may pass the higher costs on to their customers. (…)
Many U.S. companies are also facing retaliatory tariffs from China—and from Canada, Mexico, the European Union and other countries hit by U.S. tariffs this year on steel and aluminum. Data from the research group the Trade Partnership, which works with Tariffs Hurt the Heartland to assess the impact of tariffs, estimate that more than $1 billion in tariffs were paid on U.S. exports in October, based on the volume of trade of affected goods. (…)
What Explains the Trade Deficit Hitting a Decade-High? The U.S. trade deficit reached the highest level in 10 years in October, driven by a bump in imports and falling exports of American-made products.
The foreign-trade gap in goods and services rose 1.7% from the prior month to a seasonally adjusted $55.5 billion in October, the Commerce Department said Thursday. This is the largest deficit since October 2008. Imports grew 0.2% in October, while exports edged down 0.1%. The nonoil deficit is at a record level and “rising steadily,” said Ian Shepherdson, chief economist at Pantheon Economics.
“Pumping up domestic demand with fiscal easing and picking fights with trading partners does that,” Mr. Shepherdson wrote in a note to clients. (…)
October’s exports drop “partly reflects the continued drop-back in soybean shipments to China following the imposition of tariffs.…But there has also been a more general collapse in overall goods exports to China, which have now fallen by 30% over the past 12 months,” said Andrew Hunter, U.S. economist at Capital Economics.
The deficit could worsen as the dollar strengthens, making U.S.-produced products more expensive to foreign buyers. Economic growth globally appears to be cooling, which could also hamper demand from abroad. (…)
Huawei CFO’s Arrest Deals a Blow to Xi Jinping’s Drive for China Tech Supremacy Move challenges President Xi’s ambitions to make China a tech superpower
Huawei has been at the center of the spiraling rivalry between the U.S. and China. This summer, when Mr. Xi ordered China’s antitrust regulator to effectively scuttle QualcommInc.’s acquisition of NXP Semiconductors NV, he did it to protect Huawei, according to people briefed on the matter.
Huawei is a global leader in the next-generation mobile-internet networks that will transform communications in the coming years. Mr. Xi, these people said, figured that a tie-up between Qualcomm, of San Diego, and its Dutch peer could create a bigger rival to Huawei in the race to dominate those 5G networks. (…)
The Trump administration has viewed Beijing’s push to offer generous subsidies and other assistance to domestic companies to dominate 5G as a national-security threat.
The U.S. barred Huawei’s equipment from U.S. networks, seeing it as a potential backdoor to espionage, and the Trump administration has been ramping up efforts to get American allies to ditch Huawei products. (…)
“We now have a very concerted effort to make it impossible to allow Huawei to do business around the world,” Arthur Kroeber of Hong Kong consultancy Gavekal said at a conference Thursday in Shanghai. “The toolkit of the U.S. goes well beyond tariffs.” (…)
Even if both sides reach an agreement on trade, both the U.S. and China are likely to continue to decouple their high-tech supply chains, trying to exclude the other on national-security grounds.
“This is the new great game,” said Duncan Clark, chairman of technology consultancy BDA China. “On both sides, these more security-, nationalistic-driven elements are coming to the fore. The securitate are in charge now.”
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HSBC Monitor Flagged Suspicious Huawei Transactions to Prosecutors A federally appointed overseer at HSBC flagged suspicious transactions in the accounts of Huawei to prosecutors seeking the extradition of the Chinese company’s CFO.
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The Education of Huawei The telecom giant pays a price for China’s abuse of global trade norms.
From the WSJ editorial board:
(…) News reports say U.S. intelligence suspected in 2016 that Huawei was skirting sanctions, and one question is why the U.S. didn’t act sooner to send Beijing a message. The charges against Ms. Meng haven’t been published, and she and Huawei deny wrongdoing. But the South China Morning Post reported that during an internal talk on compliance in October, Ms. Meng told employees that in cases “the company is totally unable to comply with in actual operations . . . after a reasonable decision-making process, one may accept the risk of temporary non-compliance.” That risk now includes arrest.
Beijing might counter by arresting U.S. CEOs in China, and trade talks could break down. But enforcing laws and negotiating a trade deal aren’t incompatible. The U.S. has to enforce its laws or they’re meaningless, and China has to see there is a price for violating norms in pursuit of economic and security dominance. Play by the rules, and everyone can prosper.
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Huawei caves in to UK’s security demands Commitment by Chinese telecoms group follows arrest of its CFO in Canada
(…) At a meeting this week between Huawei executives and senior officials from GCHQ’s National Cyber Security Centre, the Chinese telecoms provider agreed to a series of technical demands which will change its practices in the UK, according to two people with knowledge of the discussions.
Huawei has also agreed to write a formal letter to the NCSC outlining the company’s agreement to urgently address the issues, first raised in a critical report in July by an oversight board that monitors the testing of the company’s kit before approving it for use in UK networks. (…)
Senior UK security officials have repeatedly stressed that their concerns are related to technical deficiencies and not the company’s Chinese origins. (…)
Bear Markets March Across the Globe In a sign of the breadth of the global selloff in stocks, Germany’s main stock index fell into a bear market, the latest benchmark to have tumbled 20% or more from its recent peak.
(…) Other markets already in bear territory are home to companies exposed to recent trade fights between the U.S. and China. The Shanghai Composite Index, China’s main stock benchmark, headed into a bear market in June, followed by Hong Kong’s Hang Seng Index in September and South Korea’s Kospi in October. (…)
Companies listed in Germany’s DAX are among the most sensitive to tariffs and weaker growth around the world, with roughly 80% of their revenues coming from outside of Germany, compared with just 37% outside of the U.S. for the S&P 500, according to FactSet. (…)
Afraid of the Yield Curve? You’re Eyeing the Wrong One When bond yields flatten to current levels before a recession, the S&P often posts gains over next year
(…) The investment implications of a flat or even an inverted curve aren’t obvious. The time to recession from inversion in the past has varied from a few months to more than two years. Buying the S&P 500 on the day of the first prerecession inversion of the 10-year-3-month spread led to 12-month price returns varying from a loss of 21% after February 1973 to a gain of 37% from September 1998. (…)
When the yield curve flattened to the current, still not inverted, level of the 10-year-3-month spread before each of the past seven recessions, the S&P went on to gain over the next year in five cases, and lost in only two. The curve was also this flat a few times where no inversion or recession followed and stocks did well, such as in the mid-1990s. (…)
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