EMPLOYMENT REPORTS
Carlyle Unveils Proprietary Data Showing Weak US Employment
The US Labor Department’s September employment report, whose scheduled release on Oct. 3 was among those that have been postponed since the shutdown began last week, was expected by economists in a Bloomberg poll to show a 54,000 increase in nonfarm payrolls from August’s total of about 159 million. Carlyle estimates that just 17,000 jobs were created, among the weakest results since the US economy emerged from the 2020 recession.
Carlyle for more than a decade has been calculating its own estimates of US GDP, consumer spending and inflation “to serve as timely proxies when government data is delayed or unavailable,” and has released them selectively from time to time in that circumstance.
Besides the estimate of nonfarm payrolls in September, they include gauges of US GDP growth, corporate spending and various consumer price indexes. Those indicators broadly portray a resilient, if cooling, US economy, according to Carlyle.
“What’s so interesting about the moment we’re in is the discrepancy between payrolls and the other economic indicators we’re looking at,” said Jason Thomas, Carlyle’s head of global research and investment management. “If you looked at the employment data, you’d think it’s an economy that’s on the cusp of or in a recession. That is nowhere else in the data.”
In particular, he said, “inflation looks much more widespread than just looking at the durable goods that would be subject to tariffs,” the implementation of which beginning in April has thus far caused less inflation than was anticipated. (…)
Automatic Data Processing Inc., the payrolls processing company whose ADP Research unit publishes an estimate of private-sector payrolls growth two days before the BLS, is based on 26 million employees. And Revelio Labs makes estimates based on more than 100 million US job profiles that cover two-thirds of the US workforce.
ADP estimated that private payrolls shrank by 32,000 in September, while Revelio reported an increase of about 60,000.
- Indeed Job Postings have collapsed 3.1% in September (through Sep. 26) after stabilizing during the summer.
- What can Bank of America internal data tell us about the current state of the labor market? In our view, our data suggests a continued slowdown in the pace of job growth in September.
We use Bank of America internal data to estimate a payrolls series by looking at how the number of customer accounts receiving a paycheck is changing. This data can be fairly noisy, partly due to seasonal variation. However, looking at a three-month moving average, Exhibit 1 suggests some further softening in payrolls growth occurred in September. Note the growth in this series is also weaker than in the ADP (Automatic Data Processing) private payrolls in September, which was also a soft print.
Using unemployment payments into Bank of America customer accounts as a guide to continuing unemployment claims, Exhibit 2 shows that in October the year-over-year (YoY) percentage rise in unemployment payments was around 10%, compared to a 5% YoY rise in BLS continuing claims in August. In our view, this suggests some upward momentum to unemployment.
Finally, we consider pay growth. In September, Bank of America deposit data showed after-tax wage and salary payments increased 4.0% YoY for higher-income households, 2.4% YoY for middle-income households and 1.4% YoY for lower-income households. While this reflects an acceleration for all three cohorts, the data continues to show a large divergence between the pay growth of middle- and higher- income households compared to that of lower-income households. Though, in September, this did not widen further.
What strikes me in this last chart is that wage growth for lower and middle income Americans is increasingly negative in real terms.
- “I think you’re probably hearing the same thing from just about everybody in consumer packaged goods on this is — it is kind of this barbell economy, where you’ve got higher income consumers and that are showing more resiliency and they’re still spending. You’ve got lower income consumers across different age groups that are being more discerning. They are absolutely doing what they’ve got to do to kind of maximize their household balance sheet. So we’ve got to deal with that.” – Conagra Brands ($CAG ) CEO Sean Connolly
- “Restaurant traffic at several customer channels was flat in the quarter”. – Lamb Weston ($LW ) VP Bernadette Madarieta
- “In fact, booking trends have continued to improve since our last update nicely outpacing capacity growth at higher prices and setting a record for bookings made on sailings 2 years out. And with nearly half of 2026 already on the books at higher prices, we feel pretty good about next year.” – Carnival ($CCL ) CEO Joshua Weinstein
German Factory Orders Unexpectedly Fall Again Amid Tariff Uncertainty Economists polled by The Wall Street Journal expected a 1.5% rise
Total orders tumbled 0.8% on month in August, from a 2.7% fall in July, Germany’s statistics agency Destatis said Tuesday.
Orders rose in the first quarter in the run-up to the announcement of expected tariffs from the Trump administration at the start of April. Since then, they have slumped. (…)
“With U.S. front-loading now behind us, German industrial order books are back at where they were at the start of the year: empty,” said ING’s global head of macro research Carsten Brzeski in a note to clients.
However, while the headline orders figure shows renewed weakness of German industry, it masks diverging trends. While foreign orders surged until May then collapsed, domestic orders remained subdued until July but strongly increased in August, Brzeski said.
In August, foreign orders dropped by 4.1%, with orders from outside the euro area declining by 5.0%. By contrast, domestic orders rose by 4.7%, the data said.
That offers a sign that domestic demand could drive the traditionally export-led German industrial base, helped further by new large investments unlocked by the German government—as much as 1 trillion euros in defense and infrastructure. European Central Bank interest-rate cuts in the last year also might have freed up businesses to invest more.
Still, some of Germany’s chief sectors suffered in August. Overall automotive orders fell 6.4% on month, while in the pharmaceutical industry they declined 13.5%, Destatis said.
August’s decline in orders would have been worse without large-scale orders worth more than 50 million euros, or $58.6 million. When excluding large-scale items, orders fell 3.3%, Destatis said.
ING: “With US front-loading now behind us, German industrial order books are back at where they were at the start of the year: empty (…) another illustration that Germany’s industrial slump is not about to end any time soon.”
Is the semiconductor industry no longer cyclical?
Ed Yardeni:
That is the verdict of the stock market, where the S&P 500 Semiconductors industry is trading at a forward P/E of 30.0. Following the Great Financial Crisis (GFC) until the onset of the Great Virus Crisis (GVC), this valuation multiple fluctuated mainly between 10.0 and 15.0. The industry’s forward earnings per share mostly rose during this recession-free period, but it experienced cyclical dips along the way
The same can be said for the forward revenues per share of the S&P 500 Semiconductors industry. It rose between the GFC and GVC, but was prone to cyclical dips. Since the GVC, there was a significant downturn in 2022. However, it has been a solid uptrend for forward revenues in record-high territory since OpenAI introduced ChatGPT in late 2022.
Nevertheless, we doubt that the industry is no longer cyclical. Competition is bound to increase over the next couple of years. That will depress the industry’s profit margin, at least on a cyclical basis.
A Devastating Fire at a Major Ford Supplier Will Disrupt Business for Months Novelis plant supplies about 40% of aluminum sheet used in auto industry
The plant’s operator, Atlanta-based Novelis, supplies about 40% of the aluminum sheet used by the auto industry in the U.S., according to industry analysts. Novelis said a major portion of its Oswego, N.Y., plant has been knocked offline until early next year.
Ford is the biggest user of the plant. Its F-150 pickup, the top-selling vehicle in the U.S. and the automaker’s main profit driver, is one of the industry’s biggest users of aluminum. (…)
Novelis produces more than 350,000 metric tons of sheet aluminum annually for the automotive industry, according to industry analysts. Around a dozen automakers get aluminum from Novelis, including Ford, Toyota, Hyundai, Volkswagen and Jeep maker Stellantis, according to a regulatory filing. (…)
Novelis, which is part of India’s Hindalco Industries, said it is turning to some of its plants overseas to supply aluminum for its U.S. customers. The company operates rolling plants in Europe, Brazil and South Korea. But Novelis is currently subject to a 50% U.S. tariff on imported aluminum. (…)
Industry analysts say Arconic, Constellium and other aluminum-rolling companies that supply the automotive industry likely don’t have much excess production available for automotive aluminum. (…)
IEA Cuts US Renewable Growth Forecast in Half on Trump Policies
The International Energy Agency slashed in half its forecast of US renewable energy growth by 2030, even as the rest of the world races to double its green power capacity over the same period.
The reduction compared to last year’s analysis is due to several policy changes imposed under President Donald Trump, the IEA said. Those include the early phaseout of federal tax credits for clean energy installations, import restrictions, suspension of new offshore wind leases and permit restrictions for solar and wind projects on federal land.
Global renewable power is expected to increase by 4,600 gigawatts by the end of the decade, an amount equivalent to adding the generation capacity of China, the European Union and Japan, the IEA said. Solar will account for almost 80% of that increase, according to the report.
The global forecast was revised down by 5% compared to a year ago as a result of policy changes in the US and China. The data show renewable power will continue to expand rapidly across the globe despite a pullback by the Trump administration.
EMBER, a global energy think tank, recently published China Energy Transition Review 2025, highlighting China’s much different philosophy:
Interviews with China experts conducted for this report show that for China, the clean electricity transition involves more than decarbonisation – it is a strategic pivot to reimagine development. As the fossil-fuelled growth model – once central to China’s economic rise – reaches its limits, the country is pioneering a pragmatic, phased path to “green growth,” where environmental and economic goals reinforce each other. This dynamic is creating self-sustaining momentum, towards China’s broader ambition to build an “ecological civilisation” –aligning long-term prosperity with sustainability.
Within China, the rationale for China’s clean energy transition extends far beyond climate concerns or the falling costs of electro-technologies. Official documents and expert conversations reference the growing belief that the fossil fuel economy has run its course, and that it can and should be replaced by a new, better system centred on manufactured goods that generate and run on renewable electricity.
Government plans for the energy transition treat it as a progressive transformation, unfolding over decades, that addresses socioeconomic and environmental goals simultaneously. The multiple benefits already being realised make a slowdown highly unlikely. (…)
For decades, climate action in China, as in many countries, was framed as a trade-off between environmental gains and economic sacrifice, encapsulated in the argument that “the right to emit is equal to the right to develop.” Underlying this lies an ethical paradox: how can developing economies reconcile their legitimate aspirations for prosperity with the reality of finite planetary boundaries?
The clean energy transition offers a solution. It ensures domestic energy security, provides affordable power, enables industrial upgrading and facilitates supply chain expansion. In short, it is a better way to develop, reducing the environmental pressures of the fossil fuel age while creating new opportunities for sustainable growth.
First proposed in 2007 and embedded in the constitution in 2018, this vision emphasises “harmony between humanity and nature” and upholds the belief that “lucid waters and lush mountains are invaluable assets.”
At its core, it champions green development, with environmental goals and green electrification serving as “systemic” levers – addressing environmental challenges while unlocking new avenues for economic growth and global competitiveness.
For China, pushing this transition does two big things. First, it locks in China’s role as the global manufacturing hub for the clean energy age. Second, it fixes a major vulnerability – reliance on imported fossil fuels.
The dangers of war in the grey zone Russia’s resort to hybrid warfare is a sign of weakness. But it still requires a response
The warnings are coming thick and fast. Over the past week, Friedrich Merz, the German chancellor, has said that, when it comes to Russia, “we are not at war, but we are no longer at peace either”. Danish Prime Minister Mette Frederiksen told the FT: “We are now in the most difficult situation in Europe since the end of the second world war.” She warned “we are running out of time”. And Eliza Manningham-Buller, a former British intelligence head, mused that it “may be right [in saying] we’re already at war with Russia”.
All three were responding to a wave of Russian “hybrid warfare”— aggressive acts that stop short of actually killing people. As Frederiksen explained, it is “drones one day, cyber attacks the next day, sabotage on the third day.”
European concerns have risen sharply in recent weeks, following the incursion of Russian drones over Poland and a sustained violation of Estonian airspace by Moscow’s jets. Both the Copenhagen and Munich airports were temporarily shut in response to drones. The Danes seem pretty certain that Russia was the source of their problem.
But while hybrid warfare is making more headlines, it is not new. Last year, Russia was linked to arson attacks across Europe, as well as to a plot to put parcel bombs on DHL cargo flights. Nato also accused Russia of planning to murder the CEO of Rheinmetall, a German arms manufacturer. There were several previous Russian incursions over Estonian airspace that did not make headlines. The latest was simply longer and more provocative.
A crucial question about hybrid warfare is whether to regard it as an alternative to conventional “kinetic” warfare — or simply as a prelude to it? That shapes the debate about how to respond.
One argument is that Russia’s resort to hybrid warfare reflects weakness and uncertainty rather than strength and determination. The Russians are enraged by western aid for Ukraine and threatened by the success of Kyiv’s missile strikes on energy facilities, which imperil a key source of Russian export revenue. Almost half of Russia’s oil refineries have been hit by Ukrainian drones or missiles.
The Kremlin argues that by providing Ukraine with long-range missiles and vital intelligence, the western alliance is waging a proxy war on Russia. Western officials have long weighed the possibility that Moscow might respond by striking targets on Nato territory — such as the military bases that are used as a staging post for aid to Ukraine.
But, for now, Russia is using disruptive hybrid attacks that stop short of military action against Nato territory. That relative restraint is evidence that western deterrence is working.
An alternative view is that Russia’s hybrid warfare measures are probing attacks aimed at testing western responses and dividing the Nato alliance. If that is right, Putin’s current actions could simply be a prelude to actual kinetic warfare in Europe.
These two views point to different policy responses. If the Kremlin has been successfully cowed into staying beneath the level of actual warfare, then it would be a mistake for Nato countries to respond too forcefully. Shooting down Russian planes that violate Nato airspace — a threat made by Radosław Sikorski, the Polish foreign minister — would, in this view, be a needless and dangerous escalation.
One former US official argues that there remains a “bright red line” between aggressive Russian acts that kill people — and those that do not. His view is that the argument that hybrid and conventional warfare are on a seamless continuum is a mistake. As this former official puts it: “If it turns into a conventional war, people will soon notice the difference.”
The alternative view is that if Putin can keep upping the ante, without provoking a forceful and united western response, he might be able to demonstrate that Nato’s collective defence provisions are empty. The fact that last week’s EU discussions on setting up a drone wall to counter Russia were inconclusive and acrimonious was probably noted in the Kremlin. If western unity dissolves, then smaller and weaker members of the alliance could eventually be isolated and attacked.
It is possible, of course, that neither theory is completely true — and that the biggest risk is an accidental conflict caused by Russia’s increasingly reckless use of “grey zone” tactics. What if Russian sabotage of a cargo plane, or an arson attack, caused mass casualties? DHL parcels are carried not only on cargo planes but also on passenger flights. If Russian sabotage had caused a plane to crash over Europe, killing hundreds on board, many would see that as an act of war. Putin might believe that, even in those circumstances, Europe would be all too eager to accept the Kremlin’s assurances that it was all an unfortunate accident.
So Russia’s current actions do require a response that both makes it clear that there is a price to be paid for hybrid warfare — and avoids crossing the threshold into direct combat. The best response to Russian hybrid warfare may be a western version of grey zone tactics. By its nature, hybrid warfare is asymmetrical and relies on imagination. The western alliance cannot emulate Russian recklessness. Arson attacks are off the menu. But the US, Britain and France all have offensive cyber capabilities. Presumably, they are there for a reason.
Bloomberg adds:
(…) The indicators, just from the past few weeks, are legion. Persistent drone overflights have scrambled European air traffic. Russian warplanes violated Estonian airspace. Moscow’s agents reportedly tried , unsuccessfully, to tilt the outcome of Moldova’s recent elections. In August, Russia allegedly jammed the navigational systems of European Council President Ursula von der Leyen’s plane.
Then there is the larger pattern of cable-cutting in the Baltic, bids to inflame the Balkans, and menacing surveillance of crucial undersea fiber optics in the Atlantic. Russian sabotage, assassination plots and political interference have plagued much of the continent for years. Putin is chiseling away at Europe as he hammers away at Ukraine.
His motives are layered. Hybrid war is meant to punish Europe for supporting Ukrainian resistance. It warns European countries against deploying troops to Ukraine after a potential ceasefire. More fundamentally, the hybrid war is meant to debilitate and destabilize the eastern half of the transatlantic alliance that has long checked Russian influence, while also dividing it from its western half. (…)
With an ambivalent Atlanticist in the White House, Moscow aims for provocations that sow fear in Europe but elicit a ho-hum response from Washington. If Moscow increases the pressure, while the US pivots toward other priorities, an under-armed Europe will find itself on its own. (…)
Russia’s subversive stunts are tremendously dangerous: Moscow’s agents apparently came close to bringing down a cargo plane over Germany, with potentially lethal results. (…)
Putin’s Russia is only getting nastier. The political system has become violent and quasi-fascist. The economy is thoroughly mobilized for war. Putin is forging deeper ties with other US adversaries, like China and North Korea. He believes his country is already locked in an existential conflict with “the collective west.” (…)
“To all of those young people of TikTok — I saved TikTok so you owe me big” (Trump)