Note: I am travelling in Asia until April 24. Limited equipment and different time zones will limit the frequency and depth of my postings.
US Job Openings Holding Steady Shows Labor Market Resilience
US job openings were little changed in February from the prior month, suggesting labor demand is stabilizing at an elevated level.
The number of available positions edged up to 8.76 million, mainly reflecting a pickup in finance and state and local government, from a downwardly revised 8.75 million in January. The report Tuesday from the Bureau of Labor Statistics Job Openings and Labor Turnover Survey also showed an increase in hiring. (…)
The so-called quits rate, which measures voluntary job-leavers as a share of total employment, held at 2.2% — the lowest since 2020. The moderation in quits suggests Americans are feeling less confident in their ability to find other positions in the current market or reflects a smaller wage premium for people looking to switch jobs.
The ratio of openings to unemployed people eased to a four-month low of 1.36. While still somewhat indicative of a tight labor market, the figure has eased substantially over the past year. At its peak in 2022, the ratio was two-to-one.
Indeed’s job postings keep slowly slipping towards pre-pandemic levels, still 20% lower. The labor market remains tight. Indeed postings stabilized in March through March 21st. In the last NFIB, “Eleven percent cited labor costs as their top business problem, up one point from January and only two points below the highest reading of 13% reached in December 2021”.
How to explain the break in such good relationships?
Answering the above may also address why spreads are so tight: total confidence in soft or no landing and an easing Fed protecting profit margins… and taming inflation… (but “over time”).
Close to Nirvana, again, or is it hell? The Rule of 20 Fair Value (yellow line) keeps rising thanks to profits and inflation. For how long?
Technically very extended, but no bearish signal so far. 
Eurozone Manufacturing PMI: Output and new orders decline at softest rates since early-2023
The HCOB Eurozone Manufacturing PMI, a monthly measure of the overall health of eurozone factories and compiled by S&P Global, fell from 46.5 in February to a three-month low of 46.1 in March. The decrease in the survey’s headline figure was driven by movements in the index’s two smallest components – suppliers’ delivery times and stocks of purchases – as disruption caused by the diversion of ships away from the Suez Canal abated, leading to a sharp improvement in vendor performance (which is treated as a negative cyclical indicator as it traditionally indicates less busy suppliers).
At the country level, March survey data showed further marked divergences in performance. Of the monitored eurozone constituents, Greece continued along its resilient growth path, with manufacturing conditions improving to the sharpest extent in over two years. The Greek upturn far outpaced the next-best performer, Spain, which saw another modest expansion which was only fractionally weaker than that seen in February. Italy recorded the first pick-up in conditions across its goods-producing sector for a year, while the rest of the monitored countries remained mired in contraction.
Manufacturing output within the euro area decreased in March, extending the current period of decline to exactly one year. However, the pace of contraction cooled to the weakest since April 2023. A slower downturn was also seen for new orders, with the rate of reduction easing for a fifth month in a row. Helping to curb the eurozone manufacturing demand slump was a diminished drag from international markets as export sales fell to the weakest extent in close to two years.
Eurozone goods producers continued to reduce their purchases of inputs at the end of the first quarter, although the decline was its softest since March 2023. The latest data continued to indicate a preference for using existing pre-production stocks, as warehoused inputs fell for a fourteenth successive month.
Challenges receiving purchased items from vendors continued to ease in March, with the latest survey data signalling reduced supply chain disruption for eurozone manufacturers. Suppliers’ delivery times shortened to the greatest extent since last September despite ongoing issues with ships in the Red Sea.
Meanwhile, eurozone goods producers made further inroads into their backlogs of work. Although the rate at which incomplete orders fell was its slowest since February 2023, it remained steep overall. Eurozone factories remained steadfast with job shedding, in line with the trend since last June, although the decrease in workforce numbers was moderate and unchanged from those seen so far this year.
Eurozone manufacturers recorded yet another month of falling input costs in March. The reduction was solid, but the least marked in a year. Nevertheless, prices charged for goods were discounted more heavily. Overall, the decrease in output prices was the quickest since last November.
Looking ahead, the latest survey data highlighted a pick-up in eurozone manufacturers’ growth expectations for the next 12 months. Optimism towards the outlook for production was at its strongest since April 2023, but still slightly below its long-term average.
Global manufacturing output growth strengthens as new orders rise and employment stabilises
The J.P.Morgan Global Manufacturing PMI® – a composite index produced by J.P.Morgan and S&P Global Market Intelligence in association with ISM and IFPSM – posted 50.6 in March, up from 50.3 in February and its highest reading since July 2022. The PMI has now signalled marginal improvements in overall operating conditions in each of the past two months.
Three of the PMI sub-indices signalled expansions (new orders, output and employment) in March. In contrast, those tracking trends in supplier lead times and stocks of purchases were more consistent with a deterioration in manufacturing sector performance.
World manufacturing output increased for the third successive month in March, with the rate of growth accelerating to a 21-month high. Underpinning the latest expansion was the fastest growth of new orders since May 2022. The trend in new export business also moved closer to stabilisation, with intakes decreasing at the joint-slowest rate during the current 25-month sequence of contraction (matching the pace registered in June 2022). (…)
Some pundits dismissed the improvement in manufacturing as “a head fake” as “much of this output burst went into the storage facility”. One, that’s how it normally works during an inventory cycle. Two, new orders are rising again. Three, we know that demand for goods remains strong, at least in the USA. Four, many major retailers recently said that their inventories are now back to normal.
The ISM said that the share of industries now reporting growth shot up to 50%, from 33% a year ago. And while the ISM reported continued weak employment, the broader S&P Global’s survey said that “although modest, the pace of job creation was the most pronounced since July last year.”
Good news for the economy, not so good news for the Fed. The ISM price index shot up to 55.8 from 52.5, the biggest print since July 2022. S&P Global’s survey revealed that “output price inflation quickened for the fourth month running to a sharp pace that was the fastest in just under a year, underscoring the likely bumpy path in bringing inflation down to the Fed’s 2% target.”
That was enough to spook the bond market while we await the Services PMIs today.
Meanwhile, there’s this other bump on the road:
CHINA SERVICES PMI: Services activity growth accelerates in March
The seasonally adjusted headline Caixin China General Services Business Activity Index rose to 52.7 in March, up from 52.5 in February, to signal an increase in services activity for the fifteenth month in a row. Although the rate of expansion was faster, it remained below the long-run series average.
Faster new business growth underpinned the latest acceleration of services activity expansion. The rate of new business growth was solid and the quickest since last December. Anecdotal evidence revealed that improvements in underlying demand conditions and business development efforts helped to boost the rise in new work.
Export business also increased at a slightly faster rate in March, the quickest in nine months, aided by better external demand conditions and promotional activities.
As a result, Chinese services companies were enthused by the latest growth in services activity and maintained a positive outlook with regards to business activity in the next 12 months. Furthermore, the level of business confidence increased for the first time in three months amid hopes that new product lines, expansion plans and rises in client budgets will help boost sales.
Employment levels declined for a second successive month in March,though the rate of job shedding eased from February and was only marginal. According to survey respondents, resignations among staff and redundancies to improve productivity resulted in the fall in payroll numbers.
Better productivity in March also led to the level of backlogged work falling despite faster new business inflows. The level of outstanding work declined marginally for a second consecutive month as a result.
Price pressures meanwhile eased across China’s service sector in March. While average input prices continued to rise amid evidence of higher raw material, labour and transport costs, the rate of inflation fell further below the series average in March. This enabled service providers to raise selling prices at a slower rate, though the rate of charge inflation remained slightly above its long-term trend at the end of the first quarter.
