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Non-farm: US economy stumbles by creating just 75,000 jobs in May - business live US economy stumbles by creating just 75,000 jobs in May - business live
(32 minutes later)
This neat chart shows how America’s economy has been creating jobs steadily since the end of the last recession a decade ago - matching the rise in stocks.
Update to one of my favorite charts. NFP in blue and Russell 3000 in red. cc @TheStalwart pic.twitter.com/vS7jM9LMYy
Josie Dent, senior economist at the CEBR thinktank, also spies a US interest rate cut on the horizon.....
She says:
Positive economic growth in Q2 2019 will mark the 10th year of continuous expansion of the US economy. However after today’s labour market release, few people will be celebrating. With markets also spooked by the trade war, the Federal Reserve Open Market Committee (FOMC) is under pressure to cut rates.
This could come as soon as next month.”
Several financial experts are predicting that the US Federal Reserve will cut interest rates, perhaps twice, before the end of 2019.
US interest rates are currently 2.5%, having been hiked four times in 2017 and again in 2018. That’s much higher than in rival advanced economies such as the eurozone (0%) and the UK (0.75%).
Earlier this week, Federal Reserve chair Powell promised to act appropriately to protect growth. Today’s weak jobs report piles more pressure on the Fed to start a cutting cycle soon.
Anthony Kurukgy, Senior Sales Trader at Foenix Partners, says
Fed Chair Jay Powell spooked investors this week as he pointed towards a potential rate cut as part of a dovish repositioning among major central banks, amid fears of faltering global economic growth.
Given today’s missed labour and earnings data, a continued downtrend in the jobs market may force the US Central Bank to unwind some of 2018’s rate hikes in the second half of 2019.
Mkts now price 3.3 rate cuts within the next 12mths following bad US jobs report. pic.twitter.com/xulYL6wFqx
This weak jobs report is another sign that Donald Trump’s trade war with China is hurting the US economy.
Richard Flynn, UK Managing Director at Charles Schwab, says trade tensions are a key worry.
“Today’s disappointing job numbers come hot on the heels of last week’s GDP figures, where economic growth was revised down, albeit by less than expected. However, in general the US economy has remained robust in recent months in spite of escalating trade tensions and global headwinds.
“The ongoing concern facing investors is the back and forth around rising tariffs from both sides of the U.S.-China trade dispute, with the ball currently in the Americans’ court. The near-term impact on the market is easy to see but determining the longer-term economic impact is more difficult.
Let’s get some details on the weakest US jobs report in three months.Let’s get some details on the weakest US jobs report in three months.
The government cut 15,000 jobs in May, according to the Bureau of Labor Statistics, while private companies hired 90,000 people.The government cut 15,000 jobs in May, according to the Bureau of Labor Statistics, while private companies hired 90,000 people.
Services companies took on 82,000 people, but factories only hired 3,000 new staff. Construction payrolls swelled by 4,000.Services companies took on 82,000 people, but factories only hired 3,000 new staff. Construction payrolls swelled by 4,000.
Overall, the number of unemployed Americans was “little changed” at 5.9 million, says the BLS, adding:Overall, the number of unemployed Americans was “little changed” at 5.9 million, says the BLS, adding:
The unemployment rates for adult men (3.3 percent), adult women (3.2 percent), teenagers (12.7 percent), Whites (3.3 percent), Blacks (6.2 percent), Asians (2.5 percent), and Hispanics (4.2 percent) showed little or no change in May.The unemployment rates for adult men (3.3 percent), adult women (3.2 percent), teenagers (12.7 percent), Whites (3.3 percent), Blacks (6.2 percent), Asians (2.5 percent), and Hispanics (4.2 percent) showed little or no change in May.
Disappointingly, wage growth remains modest. Average hourly earnings for all employees on private nonfarm payrolls increased by 6 cents to $27.83, or just 0.2% month-on-month. That pulled average wage growth down to 3.1%.Disappointingly, wage growth remains modest. Average hourly earnings for all employees on private nonfarm payrolls increased by 6 cents to $27.83, or just 0.2% month-on-month. That pulled average wage growth down to 3.1%.
Today’s report is the weakest since February, and it suggests America’s economy is losing momentum.Today’s report is the weakest since February, and it suggests America’s economy is losing momentum.
Bloomberg says:Bloomberg says:
U.S. employers last month added the fewest workers in three months and wage gains cooled, suggesting broader economic weakness and likely boosting calls for a Federal Reserve interest-rate cut as President Donald Trump’s trade policies weigh on the economy.U.S. employers last month added the fewest workers in three months and wage gains cooled, suggesting broader economic weakness and likely boosting calls for a Federal Reserve interest-rate cut as President Donald Trump’s trade policies weigh on the economy.
Payrolls rose 75,000 after a downwardly revised 224,000 advance the prior month, according to a Labor Department report Friday that missed all estimates in Bloomberg’s survey calling for 175,000. The jobless rate held at a 49-year low of 3.6% while average hourly earnings climbed 3.1% from a year earlier, less than projected.Payrolls rose 75,000 after a downwardly revised 224,000 advance the prior month, according to a Labor Department report Friday that missed all estimates in Bloomberg’s survey calling for 175,000. The jobless rate held at a 49-year low of 3.6% while average hourly earnings climbed 3.1% from a year earlier, less than projected.
Correct: U.S. adds 75,000 jobs in May, unemployment falls to 3.6%. Wage gains also cooled https://t.co/aLszXzyyjQCorrect: U.S. adds 75,000 jobs in May, unemployment falls to 3.6%. Wage gains also cooled https://t.co/aLszXzyyjQ
Some Wall Street economists may be nervous about their own job security.Some Wall Street economists may be nervous about their own job security.
None of the financial experts who make predictions for a living thought today’s non-farm payroll report would be so weak. Some thought more than 200,000 new jobs would have been created.None of the financial experts who make predictions for a living thought today’s non-farm payroll report would be so weak. Some thought more than 200,000 new jobs would have been created.
NFP vs. Economist Forecasts: (Actual release was below the lowest forecast) pic.twitter.com/NQCY6P8CLcNFP vs. Economist Forecasts: (Actual release was below the lowest forecast) pic.twitter.com/NQCY6P8CLc
This weak jobs report appears to increase the chances that America’s central bank cuts interest rates soon.This weak jobs report appears to increase the chances that America’s central bank cuts interest rates soon.
This is forcing the US dollar down in the international markets.This is forcing the US dollar down in the international markets.
Dollar plummets on weak payrolls number.#USD -0.27% against other currencies#EURUSD 1.13062 +0.27%#GBPUSD 1.27376 +0.34%#USDJPY 108.131 -0.26%#USDCAD 1.33087 -0.4%#AUDUSD 0.69878 +0.15%#USDCHF 0.98888 -0.24%Dollar plummets on weak payrolls number.#USD -0.27% against other currencies#EURUSD 1.13062 +0.27%#GBPUSD 1.27376 +0.34%#USDJPY 108.131 -0.26%#USDCAD 1.33087 -0.4%#AUDUSD 0.69878 +0.15%#USDCHF 0.98888 -0.24%
Traders are also piling into US government debt, driving down the interest rate or yield you get for holding Treasuries. That’s another sign they expect lower interest rates soon.Traders are also piling into US government debt, driving down the interest rate or yield you get for holding Treasuries. That’s another sign they expect lower interest rates soon.
Boom! The US 2-year Treasury #yield falls to 1.81% after disappointing #payrolls. pic.twitter.com/nsaM1AIgWCBoom! The US 2-year Treasury #yield falls to 1.81% after disappointing #payrolls. pic.twitter.com/nsaM1AIgWC
Despite the weak job creation in May, America’s unemployment rate remains at just 3.6%, the lowest level since 1969.Despite the weak job creation in May, America’s unemployment rate remains at just 3.6%, the lowest level since 1969.
But earning growth has slowed to 3.1% compared with a year ago, down from 3.2%. That’s another disappointment.But earning growth has slowed to 3.1% compared with a year ago, down from 3.2%. That’s another disappointment.
More: The jobless rate held at a 49-year low of 3.6% while average hourly earnings climbed 3.1% https://t.co/iC6D12kOy1 pic.twitter.com/4DTO7g1LVjMore: The jobless rate held at a 49-year low of 3.6% while average hourly earnings climbed 3.1% https://t.co/iC6D12kOy1 pic.twitter.com/4DTO7g1LVj
Newsflash: Just 75,000 jobs were created across the US economy last month.Newsflash: Just 75,000 jobs were created across the US economy last month.
That’s much weaker than expected (Wall Street expected the non-farm payroll to rise by 175k ish)That’s much weaker than expected (Wall Street expected the non-farm payroll to rise by 175k ish)
April’s payroll has also been revised down, to show 224,000 new jobs were created, not the 263,000 first reported.April’s payroll has also been revised down, to show 224,000 new jobs were created, not the 263,000 first reported.
More to follow!More to follow!
It’s nearly time for the last major economic news of the week - the US jobs report for May.It’s nearly time for the last major economic news of the week - the US jobs report for May.
Jobs creation is expected to have slowed last month, with the non-farm payroll tipped to increase by around 175,000, from 263,00 in April.Jobs creation is expected to have slowed last month, with the non-farm payroll tipped to increase by around 175,000, from 263,00 in April.
Economists are also hoping that wage growth held steady, and that the jobless rate remained at last month’s 50-year low of just 3.6%.Economists are also hoping that wage growth held steady, and that the jobless rate remained at last month’s 50-year low of just 3.6%.
As things stand, European stock markets are on track for their best week since April.
Britain’s FTSE 100 index has gained 150 points, or around 2%, so far this week. That means around two-thirds of the losses suffered in May have been clawed back.
Anxiety over global growth and trade wars seems to have been replaced by growing confidence that central banks will step in, again, by cutting interest rates to support growth.
That’s why today’s weak data from Germany didn’t spook the City. It simply means eurozone interest rates will remain at zero for even longer.
Holger Schmieding of Berenberg Bank explains why many of the concerns haunting markets should be “self-correcting”.
If growth softens more than expected, central banks will hold against it. The top central bank of the world, the US Fed, has significant ammunition left to do so. The ECB would have to break new ground. But it would do so eventually if need be even under a hypothetical German ECB president.
Unexpectedly robust growth in early 2019 may have encouraged Trump to escalate trade tensions in the last four weeks. If US growth now falls short of expectations and/or equity markets suffer badly, he may become more inclined to strike partial trade deals so that he can still campaign for re-election on an “I created jobs” platform.
If China’s needs to deliver a further stimulus to contain the domestic damage from trade tensions, it probably would not hesitate for long but just go ahead.
Chris Hunt, retail partner at Gowling, reckons Elliott’s takeover of Barnes & Noble makes sense:
“It is encouraging to see an example of the high street increasing the strength of its amour against the ongoing battle to retain physical stores.
The international element of the tie up will also help in term of supply chain capabilities and delivering against fast moving customer needs more closely than ever before – as ever, in-store experiences are likely to be a key feature of retaining the increased network of physical outlooks as the battle to co-exist with online sales continues in earnest.”
Books news! US bookseller Barnes & Noble is being acquired by the owners of the UK’s Waterstones book store group.
Elliott Management is paying $683m, in cash, for Barnes & Noble, and plans to run the group closely alongside Waterstones -- which has managed to repel the threat from Amazon in recent years.
CEO chief executive in James Daunt, who has led the turnaround at Waterstones for many years, will now tun B&N too.
Elliott says:
While each bookseller will operate independently, they will share a common CEO and benefit from the sharing of best practice between the companies. Waterstones has successfully restored itself to sales growth and sustainable profitability, based on a strategy of investment in their store estate and the empowerment of local bookselling teams.
Under Daunt’s leadership and Elliott’s stewardship, this commitment to bookselling excellence will strengthen the ability of both companies to navigate with success a rapidly changing retail landscape.
That works out at $6.50 per Barnes & Noble share, a 43% premium over Barnes & Noble’s stock price before rumours of a deal emerged earlier this week.
Activist firm Elliott Management to buy Barnes & Noble for ~$683M including debt; in the past five years, B&N has lost more than $1 billion in market value (Lauren Hirsch/CNBC) https://t.co/Kqztd3WmmG pic.twitter.com/o9iDSCDGNJ
Back in the UK, banks have been rebuked for hitting customers with unfairly high overdrafts.
The Financial Conduct Authority is bringing in new rules that outlaw fixed daily or monthly fees for overdrafts. The watchdog will also block banks from imposing higher fees for unauthorised overdrafts.
The FCA is also insisting that banks provide a simple annual interest rate on all overdrafts, so we’ll all be able to shop around with our eyes open,.
City regulator bans high overdraft fees to reform 'dysfunctional' market
The FCA also found that just 1.5% of customers are providing more than half of banks’ unarranged overdraft fees - suggesting the City is making a tidy profit from poor families who are struggling to get out of debt.
So, good news! Except there’s a nagging worry that the banks will find some other way to claw back the lost revenue.
@TheFCA decision to make overdrafts simpler & fairer is right one.Why should richest in society have free banking subsidised by poorest?
@TheFCA reckons the typical cost of borrowing £100 thru’ unarranged overdraft will fall from £5 a day to <20p a day.Banks made £2.4bn out of overdrafts in 2014 - 30% thru unarranged overdrafts.So that’s a big hit to bank revenue.How will they replace it?
Here’s my colleague Jasper Jolly on the worrying decline in German factories in April:
German exports and industrial output fell sharply in April, triggering fresh fears that trade tensions and continued Brexit uncertainty are weighing on the global growth outlook.
Industrial production in Europe’s largest economy fell 1.9%, which was the worst monthly fall in almost four years, according to Germany’s statistics office. It was much worse than the 0.4% decline forecast by economists.
Exports fell by 3.7% in April compared with the previous month, while imports also fell.
German industry, the powerhouse of the European economy, has suffered in the past year as trade tensions between the US and China have put the brakes on global trade growth. The German car sector, a major exporter, has also been hit by a decline in demand for vehicles in the EU and China....
More here:
German trade decline raises fears over global economy
Germany’s Brexit boost has fizzled out, agrees Edward Moya of trading firm OANDA.
He says:
It appears German factories are no longer benefiting from Brexit stockpiling and industrial production fell to the a near four year low, prompting many to believe first quarter momentum did not carry over.
With external risks are rising in the eurozone, German manufacturing remains exposed to possible further weakness on Brexit risk and the impending US-Europe tariff battle.
Economists often like to blame unexpectedly weak data on ‘seasonal factors’, or other one-off events.
In Germany’s case, we’ve had disruption in the car industry as new emissions test were introduced. Weather has also been a factor - including heavy snow last winter and unusually low levels on the Rhine (messing up transportation).
But analyst Daniel Lacalle says Germany’s factory downturn can’t be waved away so easily. The broad pattern is clearly down.
German Industrial Production...For the next time that you hear it is "seasonal" pic.twitter.com/S8pecLOUnV
Andrew Kenningham of Capital Economics is also concerned that Germany’s economy remains weak.
He told clients that growth appears to have slowed in recent months (having expanded by 0.4% in January-March).
The fall in industrial production in April adds to the evidence that Germany has not shaken off the problems which hit it nearly a year ago, and suggests that the economy slowed sharply in the second quarter of the year.
German industry is still struggling with both domestic and external headwinds, including the weakness of global trade, slowdown in household consumption growth and regulatory confusion in the auto sector.
We don’t expect a sustained improvement anytime soon.
Economist Dr Klaus Borger from the KfW banking group has said the German economy has suffered “a black eye”, adding:
“Industry had a severe backfire in April, which is also reflected in very weak exports.”
Borger fears that the drop in 3.7% drop in exports and 1.9% decline factory output in April could soon have “a noticeable impact on the labour market.”
Back in the UK, the public’s long-term expectations of inflation have hit their highest level since the last financial crisis.
A Bank of England survey found that people expect inflation to be 3.8% on average in five years time. That’s up from 3.4% in the last poll, back in February.
That suggests the public have little confidence that the BoE will hit its target of keeping inflation around 2%.
The poll also found that 49% of people expect interest rates to rise in the next 12 month, up from 47% in February.
The #British public's expectations for #inflation in five years' time have jumped to their highest in more than a decade, #BankofEngland data showed on Friday.https://t.co/zF4pExaU6Q