U.S. Wage Gains Pick Up to 2.9% While Payrolls Rise 201,000
Average hourly earnings for private workers increased 2.9 percent from a year earlier, a Labor Department report showed Friday, exceeding all estimates in a Bloomberg survey and the median projection for 2.7 percent. Nonfarm payrolls rose 201,000 from the prior month, topping the median forecast for 190,000 jobs, after a downwardly revised 147,000 advance. The unemployment rate was unchanged at 3.9 percent, still near the lowest since the 1960s. (…)
Revisions subtracted a total of 50,000 jobs from payrolls in the previous two months, according to the figures, resulting in a three-month average of 185,000.
The details across industries showed manufacturing payrolls fell by 3,000 in August, breaking an almost yearlong streak of solid gains and missing the median estimate for a 23,000 increase. Construction added 23,000 jobs.
Service providers increased payrolls by 178,000 workers, a three-month high. Gains were led by education and health services at 53,000 jobs, professional and business services with 53,000 and wholesale trade at 22,400. (…)
Average hourly earnings rose 0.4 percent from the prior month following a 0.3 percent gain, the report showed. The annual gain followed a 2.7 percent advance in July.
A separate measure, average hourly earnings for production and non-supervisory workers, increased 2.8 percent from a year earlier, after a 2.7 percent gain.
The average work week for all private employees was unchanged at 34.5 hours in August. (…)
Layoffs Reach a Half-Century Low The number of Americans filing applications for new unemployment benefits fell at the end of August to a nearly five-decade low, as managers face difficulties finding qualified employees.
U.S. Worker Productivity Rose in Spring at Best Pace Since 2015 The improvement could be an early sign that better business investment in recent months is giving workers the tools necessary to increase output
The productivity of nonfarm workers, measured as the output of goods and services for each hour on the job, increased at an annualized and seasonally adjusted rate of 2.9% in the second quarter from the prior three months, the Labor Department said Thursday. (…)
From a year earlier, productivity advanced 1.3%. That matched the average annual rate recorded from 2007 to 2017, and was less than the 2.1% annual average recorded since the end of World War II.
Productivity has advanced at a 1.0% year-to-year pace or better for seven straight quarters.
(…) unit-labor costs, akin to compensation cost per piece made, decreased at a 1.0% annual rate in the second quarter from the first quarter. But from a year earlier, unit-labor costs rose 1.9%, well above the 0.9% annual average gain from 2007 to 2017. (…)
COMPOSITE PMIs
U.S. service sector activity growth eases, amid weaker new business upturn
The latest survey data signalled a weaker rise in business activity across the U.S. service sector. 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. Meanwhile, increases in input prices and output charges eased, despite the rate of charge inflation remaining well above the series trend.
The seasonally adjusted final IHS Markit U.S. Services Business Activity Index registered 54.8 in August, down from 56.0 in July. Output growth was largely attributed by panellists to greater client demand and the opening of new facilities. However, the overall rate of growth eased to the softest since April.
Despite the rate of new business growth outstripping that of output, backlogs contracted for the second month running. The pace of decline was only fractional and eased slightly from that seen in the previous month.
Although still solid, the rate of job creation dipped to a seven-month low in August. Firms commonly reported difficulties finding suitable candidates, while greater business requirements and a sustained rise in new orders led many to increase employment.
Input prices paid by service sector firms continued to increase at a strong rate in August. The pace of inflation nonetheless softened to a five-month low, the increase was faster than the series trend. Anecdotal evidence suggested that higher cost burdens stemmed from greater purchases prices (largely driven by tariffs) and a rise in fuel costs.
Larger cost burdens were partly passed on to clients through higher output charges. Delays receiving purchases and higher wage costs were commonly mentioned as placing strain on profit margins. The rate of inflation remained strong and close to July’s recent peak.
Finally, business confidence was strongly positive and optimism improved from July’s recent low in August. Panellists stated that output expectations were driven by planned investment, greater marketing activity and a sustained rise in new business.
At 54.7 in August, the final seasonally adjusted IHS Markit U.S. Composite PMI™ Output Index fell from 55.7 in July. Although strong, the pace of expansion eased to a five-month low, driven by weaker rates of growth across both the manufacturing and service sectors.
Eurozone output growth broadly steady in August but expectations weaken
Euro area economic growth moved broadly sideways during August. The final IHS Markit Eurozone PMI® Composite Output Index came in at 54.5, up slightly from the earlier flash estimate but only a marginal improvement on July’s 54.3. (…)
In line with the recent trend, national PMI data again pointed to a broad-based expansion of economic output. All countries recorded an increase in activity, with growth again led by Ireland (7-month high). Germany (6-month high) and France (2-month high) both saw marked and accelerated rates of growth, whilst Spain registered a slight improvement in growth compared to July’s 56-month low. In contrast to other nations, Italy saw a weaker rate of expansion, with economic output here rising at its slowest rate in just under two years (22-month low).
The levels of new work continued to increase during August, with the rate of growth improving slightly on July, but business confidence regarding future activity continued to weaken. Latest data showed expectations were at their lowest level for 23 months as global trade tensions and the unknown impact on future activity continued to undermine confidence. Most notably, sentiment amongst Italian and Spanish companies fell to around five-year lows. Expectations in France were at their weakest in over a year-and-a-half.
Despite relatively subdued expectations for activity, companies continued to add to workforce numbers. Growth was again marked and improved since July to a six-month high. Germany saw a particularly strong rise in employment, with growth here accelerating to its best since March 2011. In contrast, job creation in Italy was the lowest for a year.
Input costs again rose at a sharp pace, despite inflation easing to a three-month low. A similar trend was seen for output charges. Price pressures remained most acute in Germany, compared to relatively subdued trends in Italy (where a slight fall in output charges was recorded).
August’s final IHS Markit Eurozone PMI® Services Business Activity Index edged up to 54.4 from July’s 54.2, and was unchanged on the earlier flash reading. (…)
The survey data for the third quarter so far suggest the single currency area is on course to at least match the 0.4% expansion of GDP seen in the second quarter, yet the downturn in optimism raises questions over whether this pace of growth can be sustained into the fourth quarter. (…)
Growth also looks worryingly unbalanced. Although all of the largest euro countries have seen growth moderate so far this year, solid expansion is still being signalled for Germany and, to a lesser extent, France. (…)
Price trends are also varied across the region, ranging from near-record inflation in Germany to falling prices in Italy, serving as a reminder that deflationary pressures, it appears, have not completely disappeared from the euro area.
China business activity growth slips to five-month low in August
The latest Caixin China Composite PMI™ data (which covers both manufacturing and services) indicated that business activity growth across China weakened for the second month in a row in August. Notably, the Composite Output Index fell from 52.3 in July to a five-month low of 52.0, to signal only a modest rate of expansion.
The decline in the headline index was driven by slower growth of services activity during August. Furthermore, business activity at services companies increased at the weakest pace since October 2017. This was highlighted by the seasonally adjusted Caixin China General Services Business Activity Index falling for the second month in a row, from 52.8 in July to 51.5 in August. In contrast, manufacturing production rose at the quickest rate since January, though growth remained moderate overall.
In line with the trend for activity, services companies signalled a further upturn in total new business during August. That said, the rate of expansion remained modest, despite improving from July’s 31-month low. At the same time, manufacturers noted only a marginal rise in new order volumes, with the pace of growth the weakest seen since May 2017. Reports from panellists indicated that relatively subdued demand conditions weighed on sales in the latest survey period. As a result, new orders at the composite level expanded at the slowest rate in 26 months. (…)
Following a three-month sequence of reduction, backlogs of work were little-changed at service providers in August. Unfinished workloads meanwhile rose for the thirtieth month in a row at manufacturing firms, though the rate of accumulation was the softest seen since February. Nonetheless, the increase at goods producers led composite outstanding business to rise again, albeit marginally.
Stronger rises in input costs were seen across both the manufacturing and service sectors in August. The steepest rate of inflation was once again registered in manufacturing amid widespread reports of greater raw material costs. Services companies signalled a solid increase in operating expenses that was the quickest seen for six months. A number of service providers commented on higher prices for fuel and raw materials, as well as greater staffing costs.
Prices charged by Chinese companies also rose further in the latest survey period. Factory gate prices increased modestly overall, despite the rate of growth quickening from July. Meanwhile, the pace of charge inflation across the service sector was marginal and similar to that seen in the previous month. As a result, composite output charges rose for the fifteenth month running, albeit modestly.
Although overall sentiment towards the 12-month business outlook improved slightly from July’s recent low, confidence remained relatively subdued in the context of historical data. Notably, the level of optimism at services companies remained below the long-run series average, while sentiment at goods producers held close to June’s six-month low.
China Tariffs Threaten Cloud Costs
(…) The latest round of tariffs, announced last month, applies levies of up to 25% on many key components of cloud computing, from motherboards to memory modules and coaxial cables, hitting both U.S. cloud providers and users, the Washington-based technology and public-policy think tank said in a report this week.
All told, it estimates that a 10% levy on these imports would slow U.S. economic output by $163 billion over the next 10 years, while a 25% levy would slow output by $332 billion. (…)
The new set of tariffs would raise costs for cloud providers in the U.S., where there are currently 3 million data centers supporting cloud services, ITIF researchers said.
In turn, higher costs would be passed along to cloud users through higher prices, the report said. It estimates that more than 90% of U.S. businesses, big and small, rely on some form of cloud computing, adding that together they spent $70 billion last year on public cloud-computing services. (…)
According to CompTIA, an IT industry trade group, total U.S. tech imports from China totaled an estimated $165 billion in 2016, with cell phones accounting for roughly 40%, based on the latest available data.
Stefanie Holland, the group’s senior trade advisor in Washington, said the proposed tariffs on cloud equipment and other IT components from China amount to “taxes that are going to make manufacturing here in the U.S. more expensive,” she told CIO Journal. (…)
Eurozone Economic Growth Falls Further Behind U.S. The eurozone’s economy slowed slightly in the three months through June as imports jumped despite weak household spending, with few signs that a rebound is in prospect soon.
(…) The European Union’s statistics agency Friday said gross domestic product—the broadest measure of the goods and services produced by the eurozone’s 19 members—was 0.4% larger in the second quarter than in the first, and 2.1% up on the same period a year earlier. That was the equivalent of an annualized rate of 1.5%, slightly below the 1.6% rate of expansion recorded in the three months through March. It was well below the 4.2% annualized increase in U.S. GDP during the three months through June.
For the second straight quarter, trade was a drag on economic growth in the eurozone, as imports rose at almost twice the pace of exports. But household spending was also weak, rising at less than half the pace of the first quarter.
However, eurozone policy makers will be reassured by an acceleration in investment spending. Officials at the European Central Bank had expressed concern that a loss of confidence in the face of trade tensions between the U.S. and the European Union would hold back needed upgrades of equipment and facilities in the currency area. (…)
Bank of Canada Likely to Raise Rates Central bank official says trade protectionism would weigh on growth but push up inflation, creating trade-offs
A breakdown in talks toward a revised North American Free Trade Agreement wouldn’t necessarily prevent the Bank of Canada from raising interest rates, a senior official from the central bank said Thursday.
The Canadian dollar strengthened against the U.S. dollar shortly after the remarks were released, in a sign traders believe another rate increase, as soon as October, is in the offing.
Senior Deputy Governor Carolyn Wilkins said in a speech that tariffs and other protectionist measures can weigh on economic growth and incomes, particularly as businesses work to adjust to any policy changes. She said those same measures can also push consumer prices higher, a key concern for a central bank that sets policy to achieve and maintain 2% inflation.
“In weighing these trade-offs, you can be sure that [the central bank’s] governing council will not lose sight of our primary mission,” Ms. Wilkins said, referring to the bank’s inflation-targeting mandate. “Low and stable inflation will help reduce at least one source of uncertainty for companies and households.”
Other policy tools, outside of rate policy, would be better-suited to help manage the economy’s adjustment to increased protectionism, she said. Further, Ms. Wilkins said a successful outcome from Nafta talks under way between the U.S. and Canada could push growth higher than anticipated. (…)
HNA, Under Pressure From China, to Sell Its Overseas Empire HNA intends to unload its entire stake in Deutsche Bank and sell off the vast majority of overseas investments it made in recent years, according to people familiar with the matter.
Tech Declines Add to Pressure on Emerging Markets
Tech trouble adds to pressure on MSCI ’s widely followed gauge of emerging markets, which has already been hit by a strong dollar and trade friction. The index hit a 13-month low Thursday. That put it into bear-market territory, with a loss of more than 20% from its record high in January.
Chinese heavyweights Tencent Holdings Ltd. TCEHY 0.24% and Alibaba Group Holding Ltd.BABA -2.65% and South Korea’s Samsung Electronics Co. are among the largest constituents in MSCI’s flagship emerging markets index. (…)
