Payroll employment increases by 130,000 in August; unemployment rate unchanged at 3.7%
Total nonfarm payroll employment rose by 130,000 in August, and the unemployment rate held at 3.7 percent. Federal government employment rose, largely due to the hiring of 25,000 temporary workers for the 2020 Census.
The change in total nonfarm payroll employment for June was revised down by 15,000 from +193,000 to +178,000, and the change for July was revised down by 5,000 from +164,000 to +159,000. With these revisions, employment gains in June and July combined were 20,000 less than previously reported.
Job growth has averaged 158,000 per month thus far this year, below the average monthly gain of 223,000 in 2018. In August, private-sector employment was up by 96,000 (…)
Yesterday we got totally conflicting readings from the ISM and Markit on the U.S. Services sector, America’s main employer. This employment report tends to confirm that Markit’s reading was more accurate:
The ISM survey contained bizarre findings, notably pretty weak employment against rising activity and new orders.
The odds are thus that, contrary to what the ISM is showing, the services sector seems to be following manufacturing’s downward trend:
Note also that the BLS keeps revising its initial monthly estimates downward, never a good sign.
August Vehicles Sales increased to 17.0 Million SAAR
The BEA estimated sales of 16.97 million SAAR in August 2019 (Seasonally Adjusted Annual Rate), up 0.7%% from the July sales rate, and up 0.7% from August 2018.
Sales in 2019 are averaging 16.9 million (average of seasonally adjusted rate), down 1.2% compared to the same period in 2018. (…)
Trade Uncertainty Likely to Cut U.S. Growth by More Than 1%, Fed Says Uncertainty over trade policy is likely to reduce U.S. economic output by more than 1% through early 2020, Federal Reserve research suggests.
Global Recession Comes Nearer As August Job Growth Turns Negative In China, The USA And India Collectively
Sales Managers, who necessarily scent recession earlier than other executives, are pulling back sharply on recruitment in the worlds three biggest economies.
China, the USA and India collectively represent over 40% of global GDP measured in purchasing power parity terms, and contribute an even bigger proportion of global growth.
Farm loan delinquencies surge in U.S. election battleground Wisconsin Farm loan delinquencies rose to a record high in June at Wisconsin’s community banks, data showed on Thursday, a sign President Donald Trump’s trade conflicts with China and other countries are hitting farmers hard in a state that could be crucial for his chances of re-election in 2020.
The share of farm loans that are long past-due rose to 2.9% at community banks in Wisconsin as of June 30, the highest rate in comparable records that go back to 2001, according to a Reuters analysis of loan delinquency data published by the Federal Deposit Insurance Corporation.
While the number of seriously delinquent farm loans is rising nationwide, the noncurrent rate has more than doubled at Wisconsin’s community banks since Trump took office in January 2017. It now stands higher than in any other of the top 10 U.S. farm states as measured in production – a list that includes California, Iowa and Texas.
Nationwide, the share of farm loans at all FDIC-insured banks that are at least 90 days past due or are no longer accruing interest because of repayment doubts stood at 1.5% at the end of June, the FDIC data showed.
That marked the highest rate since 2012 but only about half the rate seen at community banks in Wisconsin. (…)
One in nine jobs in Wisconsin are tied to its $88 billion agriculture industry and the sector’s woes, which have also grown due to severe weather this past spring, could drag on the state economy. (…)
Jim Zimmerman, a corn farmer in Fond du Lac County, Wisconsin, said he was still holding out hope that they could be better off in the long run.
Zimmerman, who voted for Trump in 2016, said it was too soon to decide how – or if – he will vote in November 2020.
“But talk to me in six months, and if nothing is resolved? It’ll be a different story,” he said.
China: State Council meeting sends strong loosening signal
PM Li Keqiang held a State Council meeting on 4th September, aimed at achieving the “six stabilities” (i.e. stability in employment, finance, trade, foreign investment, investment and expectations). This meeting was highly important because the language was strong and measures tangible, unlike the 20 consumption stimulus measures announced last week. Most of the measures were geared toward supporting growth via fixed asset investment. Specifically, the meeting announced:
Next year’s special purpose bond will be issued ahead of the schedule, which effectively means the annual quota will be raised. Although the announcement did not specify the amount, we would expect the amount to be several hundred billion Rmb as any unit below (i.e. tens of billions) would likely not be meaningful, and above it (in the trillions), unlikely. The proceeds from the issuance would be permitted to be used in a greater number of areas than previously specified, including transportation projects (railways, parking lots, etc.), energy projects (electricity grids, natural gas pipelines, etc.), environmental protection projects (sewage treatment, waste recycling, etc.), services (professional education, healthcare, etc.) and infrastructure facilities (cold chain logistics, utilities and industrial parks, etc.).
Broad based and targeted RRR cuts should be used. While it is not clear if this is more the result of considerations about perception, as the RRR is often seen as a blunt loosening tool or about financial stability (some believe too low of a RRR level can be bad for financial stability – though this is debatable), there appears to have been some reluctance to use broad based RRR cuts after the first cut in January.
Policymakers plan to accelerate the lowering of the actual interest rate level and to improve the performance assessment incentive system for financial institutions to increase financial support given to the real economy, especially small and micro enterprises. This suggests rates such as the MLF and LPR may be lowered soon. The time for the PBOC to cut these would likely be just ahead of the Fed meeting. We do not think a Fed cut will be an obstacle for the PBOC given the strong signal today and given the market appears to be pricing in 2 Fed cuts, in September and October (so the chance of a no-Fed cut at all in the next 2 months, appears very low).
This is the strongest loosening signal from any policy meeting year to date. The expected policy measures should provide support to the real economy reducing the risks of a dramatic slowdown in the second half. Having said that, there are still a lot of uncertainties in terms how much loosening will be done e.g. the size of any additional special bond quota. As a baseline forecast we still expect this round of loosening to be less aggressive than the one we saw in 1Q. Risks to the 6.1% yoy GDP forecasts we have for 3Q and 4Q (implying sequential real GDP growth of slightly below 6%) appear to be largely balanced. We continue to forecast 100bp RRR cuts and 30bp cut in MLF rate by year-end. We maintain that the next broad based RRR cut can happen at any time and it can be combined with a targeted RRR cut.
Huawei shows off ‘most powerful’ chipset as forges ahead with 5G smartphone plan
Huawei Technologies showcased its chipset for a new high-end smartphone on Friday, pressing ahead with plans to launch its Mate 30 range, despite uncertainty about whether the new phones will be able to run Google’s Android operating system and apps.
The Chinese tech giant bills the Kirin 990 chipset as the first all-in-one 5G system on a chip, describing it as superior to alternatives from Qualcomm (QCOM.O) and Samsung (005930.KS) that, it says, graft 5G modems on to 4G chips.
“It’s the world’s most powerful 5G system on a chip. It’s the world’s most powerful 5G modem,” Richard Yu, the head of Huawei’s consumer business group, said in a speech in Berlin. (…)
The Kirin 990 packs more than 10 billion transistors and can support downlink speeds of up to 2.3 gigabits per second.
It has an adaptive receiver that enables it to switch between 4G and 5G where coverage of the faster technology is weak.
And, to save energy, it has a ‘big core’ to handle powerful computing tasks with the support of artificial intelligence, and a ‘tiny core’ for less demanding operation. (…)
“Qualcomm has a scale advantage,” said Ben Wood, analyst at CCS Insight. “Huawei’s commitment to continue innovating on silicon is really impressive, especially given the geopolitical headwinds they are facing.
“But at the end of the day, it’s a single-vendor solution. And, even if they had aspirations to sell the chipset, that is getting more difficult all the time.”
“Scale advantage”! Huawei sold 118 million smartphones in the first 6 months of 2019. In Q2’19, it’s share of the world smartphone market was 17.6%, up from 11% in 2017. Apple’s share in Q2’19 was 10.1% while Samsung’s was 22.7%.
States to Launch Google, Facebook Antitrust Probes State attorneys general are formally launching separate antitrust probes into Facebook and Google starting next week, putting added pressure on tech giants already under federal scrutiny.
(…) The attorneys general will examine the impact of Google on digital advertising markets, this person said, as well as potential harms to consumers from their information and ad choices being concentrated in one company. (…)
Separately, an overlapping bipartisan group of attorneys general led by New York Attorney General Letitia James, a Democrat, is organizing a probe into social media company Facebook, according to these people.
“We continue to engage in bipartisan conversations about the unchecked power of large tech companies,” Ms. James said in a statement to The Wall Street Journal when asked for comment on the probe. “The attorneys general involved have concerns over the control of personal data by large tech companies and will hold them accountable for anticompetitive practices that endanger privacy and consumer data.”
Facebook recently agreed to shell out $5 billion to settle Federal Trade Commission allegations that it repeatedly used deceptive disclosures and account settings to lure users into sharing personal information, and remains under federal scrutiny for issues including whether it acquired companies such as Instagram to stave off competition. (…)
The action by the attorneys general, which has been anticipated for weeks, could possibly be expanded to other companies beyond Google and Facebook, some of the people said. (…)
“The extreme concentration in the technology industry is bad for the consumer, and in our opinion it’s bad for America,” Tennessee Attorney General Herbert Slatery III said at a June hearing on antitrust concerns in the tech industry, flanked by two other state attorneys general. “The concentration has stifled innovation with market distortions [in] research and development, as entrepreneurs avoid competing with Google and Facebook and other tech giants. So we need to do something about that.” (…)
At a minimum, the attorneys general’s involvement this time is sure to add complexity and cost for the companies. For instance, the state attorneys are often able to extract large fines in antitrust cases, in circumstances where federal enforcers can’t. (…)
The WSJ article includes a good video on what this is all about.
What France—Yes, France—Can Teach the U.S. About Free Markets From cellphones to airfares, competition has risen in Europe but shrunk in America
BTW:
WeWork Weighs Slashing Valuation by More Than Half WeWork’s parent company is considering slashing its valuation roughly in half to around $20 billion amid IPO skepticism
-
WeWork Reset Smacks of Desperation Company may cut its valuation in half for its coming IPO, but it is still too expensive amid other warning signs
(…) While WeWork is growing quickly, that is only because it started from nothing. IWG , which owns rental business Regus, which has similar office-sharing properties, has an enterprise value of roughly $12 billion. Regus boasts 3,000 locations in 12 different countries versus WeWork’s 528 locations. In 2018, IWG had $3.1 billion in revenue, compared with WeWork’s $1.8 billion in revenue last year. (…)
If private investors are willing to take considerably lower valuations, it is yet the next warning sign that public investors should be on guard. (…)
At first glance, WeWork and Peloton, which both released their S-1s in recent weeks, don’t have much in common: one company rents empty buildings and converts them into office space, and the other sells home fitness equipment and streaming classes. Both, though, have prompted the same question: is this a tech company?
Of course, it is fair to ask, “What isn’t a tech company?” Surely that is the endpoint of software eating the world; I think, though, to classify a company as a tech company because it utilizes software is just as unhelpful today as it would have been decades ago. (…)
Fortune’s Adam Lashinsky concludes:
What Thompson doesn’t do is finish his argument to explain what it means to valuations. That debate is playing out in real time. As investors recognize that WeWork actually is a real estate company, its perceived valuation is shrinking. Investors reward tech companies for two reasons: They tend to grow quickly and, when they work, gush profits. Or, as a banker friend told me, investors will pay up for “leverageable growth.” Mere “linear growth” doesn’t matter.
This is all reminiscent of the dot-com days, when companies literally slapped a “dot-com” on their name and asked for—and often received—higher valuations. Says my banker pal: “The similarities to Pets.com are overwhelming.”
The lesson is clear, whether the topic is valuation or strategy. Sprinkling some A.I. pixie dust or, more seriously, even intelligently deploying the latest innovations do not make every company a technology company. If you need convincing, keep watching WeWork’s public flogging for its crimes of hubris and excessive cheerfulness.