Here's our summary of key economic events overnight with news both the US and Australia have entered 2022 in an improved and optimistic economic mood, in contrast to Japan, China and the EU.
In a major surprise, the US non-farm payrolls report was unexpectedly positive. The headline gain reported was +467,000 and far above the +150,000 gains which was widely expected, and nowhere near the -400,000 loss that some pessimists had feared.
Better, there were some significant revisions to job gains in November and December which mean employers added +700,000 more jobs than these non-farm payrolls reports had previously indicated. That is pretty significant.
Of course, regular readers will know that we also look at 'actual' job numbers and not just the seasonally adjusted levels. It is usual for the actual January payrolls to fall sharply from December and that happened this year too. The official data tries to look through those seasonal patterns. But the year-on-year employed workforce numbers do that too. The January 2022 employed workforce now total 147.5 mln, up +6.5 mln from January 2021. But it is down -2.5 mln from pre-pandemic January 2020 so they still have a long way to go to fully recover the pandemic effects. The January 2022 levels are about the same as the January 2018 levels.
The US participation rate is a improving sign however. For the first time in a long time it rose significantly, up to 62.2% from 61.9%. More people are back entering their workforce and wanting to participate in their labour market. It is not yet back to the levels last seen in the Obama years, but at least it is back above most of the Trump period.
The other positive out of today's data is that average hourly earnings increased to US$31.63 (NZ$47.70), up +5.7% over the past year. It was the largest monthly increase in the last year, and although inflation is high, it shows that wages are largely keeping up. CPI was up +5.5% in an actual (not seasonally adjusted) basis. Core PCE was up +4.9%.
Markets responded by seeing these numbers all but ensuring the Fed will raise rates in March and maybe aggressively. With the employment part of their mandate sorted for now, the focus is now unambiguously on inflation. The UST 10 year rate jumped. Equity markets rose on the basis that higher employment is always better. A strong Amazon result on top of the earlier strong Google result well overcame the weak Facebook disaster. And the USD rose.
Canada also released its jobs report for January and that was not positive at all. They lost -200,000 jobs on a seasonally adjusted basis (much more on an actual basis) and this was worse than the -118,000 analyst estimates. Their participation rate fell. Their jobless rate rose, and wage gains came in far less than current inflation. They will be grumpy with this result, especially after their neighbour's positive surprises.
In the EU, their retail sales data for December was also a significant disappointment, falling from November and rising a very weak +2.0% from December 2020 when a +5.1% gain was expected. And given rising inflation, that meant that retail volumes are falling now.
The OECD reported that overall inflation rose to +6.6% in the 12 months to December 2021, compared with +5.9% in November, and just +1.2% in December 2020, reaching its highest rate since July 1991. This increase was driven in part by a surge in annual inflation in Turkey (to +36.1% in December). Excluding Turkey, inflation in the OECD area increased to +5.6% in December.
The Reserve Bank of Australia has updated and upgraded its economic forecasts for the country in its Monetary Policy Statement released late yesterday (Friday).
But although they now say their economy will grow by +4¼% this year, growth will slow to +2% in 2023. However both are upgrades from their October forecasts.
Their pandemic rebound and their lower jobless rate means the Australian economy is about to swell to levels above what was being forecast for 2022 and 2023 before the pandemic hit. However, it isn't all positive. Aussie inflation is expected to well outpace wage growth this year.
In NSW, there has been a drop to 10,698 new community cases reported yesterday, now with 102,847 active locally-acquired cases, and another 31 daily deaths. There are now 2,494 in hospital there, off their high. In Victoria they reported 11,240 more new infections yesterday. There are now 65,968 active cases in that state - and there were 36 more deaths there. Queensland is reporting 6,857 new cases and 13 more deaths. In South Australia, new cases have slipped to 1583 yesterday and one death. The ACT has 449 new cases and one death, and Tasmania 570 new cases and no deaths. Overall in Australia, about 31,000 new cases have been reported yesterday.
The UST 10yr yield opens today at 1.92% and up another +9 bps. That's more than a two year high. The UST 2-10 rate curve starts today a little flatter at +61 bps. Their 1-5 curve is little-changed at +90 bps, while their 3m-10 year curve is noticeably steeper at +188 bps. The Australian Govt ten year benchmark rate is up +11 bps at 2.02%. The China Govt ten year bond is unchanged at 2.72%. The New Zealand Govt ten year is up +8 bps at 2.60%.
On Wall Street, the S&P500 is up +0.7% to start their Friday trading and heading for a +1.7% weekly gain. The NASDAQ index is recovering today on the Amazon and Google results. Overnight, European markets were all down by varying amounts ahead of the US data. Yesterday, Tokyo rose +0.7% to be up +2.8% for the week. Hong Kong was back trading and making up ground after their holiday and up +3.2%. Shanghai remained closed for the final day of their week-long holiday. Yesterday the ASX200 rose +0.6% to end up +1.9% for the week while the NZX50 fell -0.5 but managed a very good +3.6% gain for the week..
The price of gold starts today at US$1806 and somewhat surprisingly unchanged from this time yesterday.
However oil prices are up strongly and by nearly +US$3.50 from yesterday at just under US$91.50/bbl in the US, while the international Brent price is now just under US$93/bbl and up about +US$2.50. At these levels, they are more than seven year highs.
The Kiwi dollar will open today little-changed at 66.3 USc. Against the Australian dollar we are also little-changed at our lower level at 93 AUc. Against the euro we are unchanged as well at 58.7 euro cents. That means our TWI-5 starts today still just under 70.9.
The bitcoin price is up almost +10% since this time yesterday and now at US$40,402 with its boost coming only from the non-farm payrolls result. Volatility over the past 24 hours has been extreme at +/- 6.0%.
Finally, please note that this is a long holiday weekend in New Zealand, with Monday a public holiday for Waitangi Day, New Zealand's national day. There will be no 90@9 Briefing on Monday and limited service on this website.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.