Here's our summary of key economic events overnight that affect New Zealand, with news the giant US economy is actually showing few signs of slowing, despite the 'talk'.
Markets were expecting a +268,000 increase, but the seasonally adjusted American non-farm payrolls rose +372,000 in June from May to be +6.3 mln higher than a year ago, and +1.1 mln higher than in the pre-pandemic June 2019. By this measure, this June 2022 data records substantial progress. But it is actually better than that. As regular readers know, we also look at the actual, rather than seasonally adjusted numbers, and June's employed labour force is actually +944,000 higher than May's and continuing a trend that exposes a very sharp rise in actual hiring.
High inflation in a strong labour market is sure to keep the US Fed in its rate hiking mood, the next of which will come on July 28 (NZT), now probably +75 bps. Two of the Federal Reserve's most vocal hawks said they would support another big interest rate increase but a downshift to a slower pace afterward, even as both downplayed the risk of higher borrowing costs pushing the US into recession.
The American jobless rate held at 3.6%. Average weekly earnings rose +5.1% to US$1,106.76 (NZ$1790/week).
For perspective, there are now 158.7 mln people employed in the US, with 6.3 mln unemployed (including 'between jobs'). In China, there are 745.3 mil people employed, with 46.7 mln unemployed (5.9% jobless rate) and average weekly earnings of US$306/wk.
The rise in American wholesale inventories continued in May, but at a slower pace than for April. Their inventory-to-sales ratio remains low from an historical perspective, but as we have noted before, firms are moving to actively reduce this buildup, and that is affecting factory new orders worldwide.
The US reported that consumer debt (not housing) rose by +US$22 bln in May, less than expected (+US$32 blb), and much less than the April rise of +US$36 bln. They now collectively owe US$4.54 tln in consumer debt, a per capita rate of US$13,660 each. For perspective, New Zealanders owe NZ$2,600 each on a per capita average.
Canada also reported jobs numbers for June, shedding -43,200 jobs in the month although almost all of those were part-time jobs. Canada has been shifting from part-time to full-time for most months in 2022, although this month there was not compensating growth in full-time jobs. Canada's jobless rate fell to 4.9% which is a record low for them. The US is at 3.6%. Australia is at 3.9%. New Zealand is at a 3.2% unemployed rate.
The big background news from yesterday has been the Abe assassination in Japan. Markets are stable.
In Taiwan, export data for June was very strong, rising more than +15% year-on-year to US$42.2 bln in the month, far better than the +13.6% rise expected and the +12.5% rise in May. The Taiwanese export juggernaut rolls on. They even managed to keep import growth lower than expected and lower than for May, even with the oil price pressures. The trade balance stumble in May is behind them now.
In China itself, nationalist fervour is building ahead of the CPC party Congress. But as we have reported before, their economy is struggling and major announcements on vast new stimulus are expected soon. Local authorities are already distributing helicopter money to keep retail activity bubbling along. But in the industrial heartland things are serious. China’s steel mills are sounding the alarm over crisis conditions in the industry as margins plunge due to weak demand. The starkest warning yet has come from Hunan Valin Iron & Steel Group, which met this week to discuss the rapid downturn in the sector and the measures it needs to take to ensure the company’s survival, including halting unprofitable production. Citing industry experts, the mill based in southern China, said it expects the crisis to persist for five years. Iron ore prices fell again on Friday, weighed by the gloomy demand outlook in China.
In Australia, the insurance costs of their on-going flood catastrophes in NSW are already at AU$100 mln. Some insurers are calling on immediate restrictions on rebuilding on flood plains. That may affect more than 15% of households there, perhaps thousands who can't return. New Zealand premium costs are sure to feel the impact from stressed Aussie insurers.
The UST 10yr yield starts today back up at 3.08% and a +8 bps rise from this time yesterday. A week ago it was at 2.89%, so up +19 bps since then. The UST 2-10 rate curve has stayed negative - just, at -1 bp. Their 1-5 curve is little-changed at +18 bps. Their 30 day-10yr curve is noticeably flatter at +153 bps. The Australian ten year bond is +7 bps higher at 3.58%. The China Govt ten year bond is unchanged at 2.86%. However the New Zealand Govt ten year will start today up a mere +1 bp at 3.64%. A week ago we were at 3.71% so a -7 bps retreat since then.
Wall Street has accepted the non-farm payrolls and moved on already, up +0.2% in Friday afternoon trade and heading for a weekly rise of +3.5%. (Last week it fell -2.4%.) Overnight European markets ended strongly with Frankfurt up +1.3%, Paris up +0.4%, but London level pegging, up just +0.1%. All cemented modest weekly gains. Yesterday Tokyo ended up +0.1% for a weekly rise of +1.7%. Hong Kong rose +0.4% to end its week up +0.2%. And Shanghai ended down -0.3% for a weekly fall of -0.8%. The ASX200 ended its Friday session up +0.5 for a strong weekly fain of +2.1%. The NZX50 ended up +0.5% on Friday for a very creditable weekly gain of +3.9%.
The price of gold is staying lower but up another +US$3 from this time yesterday at US$1743/oz. A week ago it was at US$1808/oz, so it has fallen -US$65/oz since.
And oil prices have moved back up today, up +US$2 at just under US$103/bbl in the US, while the international Brent price is just under US$106/bbl. A week ago these levels were US$107 and US$111/bbl, so a small shift lower this week.
The Kiwi dollar will open today marginally firmer at 61.9 USc. Against the Australian dollar we are unchanged at 90.3 AUc. Against the euro we are also unchanged at 60.8 euro cents. That means our TWI-5 starts today at just over 70.6. That is a minor +25 bps higher in a week.
The bitcoin price has risen since this time yesterday and is now at US$21,831 and up +4.5%. For the week it is up +13% off its recent low. Volatility over the past 24 hours has been moderate at +/-2.9%. The US Fed is keeping a close eye on the crypto sector, watching the various forces at play; regulatory evasion to tech innovation.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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34 Comments
Markets were expecting a +268,000 increase, but the seasonally adjusted American non-farm payrolls rose +372,000 in June from May to be +6.3 mln higher than a year ago, and +1.1 mln higher than in the pre-pandemic June 2019.
Something Snaps In The US Labor Market: Full, Part-Time Workers Plunge As Multiple Jobholders Soar
Payroll euphoria strikes again. While the Est Survey beat expectations, the employment data actually shows we might already be in recession. CES is overly smoothed and will likely have to be revised as trend-cycle (subjective) adjustments get adjusted.
For the second time in three months, the Household Survey fell *sharply.* While Est Survey got all the attention for being "good" and justifying rate hikes, the HH Survey is very much looking like a recession has started. This is 3mos now. Not random. Link
The Treasury Curve Will Still Guide You Toward Useful Truth
Treasuries are the central currency of the global interbank money system, which, eurodollar, just so happens to be the global reserve currency.
And like the historic importance once attached to gold, though more indirectly in this case, the importance attached to Treasuries (as both liquid assets as well as usable even necessary collateral) is as equally useful.
Foreigners (and domestic banks) buy them as they rise in price because of why they rise in price. Collateral scarcity drives that liquidity premium; therefore, the system requires participants (all classes) obtain them at almost any price when there isn’t enough eurodollar “currency” in the system.
They get sold as they fall in price because of why they fall in price, merely the opposite of above.
David - because energy underwrites money (more accurately: underwrites work) 100%, and the energy blip we predicated EVERYTHING on was finite, thus temporary, your comment is illogical. In fact, given that an inevitable event must be closer with the advancement of time, it's even more than illogical.
Sorry, but it is. It's a little like saying you haven't died yet, therefore you won't. You know damn well you will, and - like me - you're closer to the dying end than the birthing end. Or are you pie-in-the-sky-when-you-die religious; the ultimate death-denial? (As an aside, I think anyone in the latter category probably hasn't got what it takes to be a journalist - they've already demonstrated the need/ability to override fact with comfortable narrative).
The writer you mention, almost certainly will be 'energy blind', and thus any argument he mounts will be invalidly-based. But rebutting him, without widening the perspective, is equally blind; the whole argument is invalid due to lack of scoping. Rebutting as you did is, I suggest, using 'shoot the messenger' to shoot the message.
Just sayin'....
https://podcasts.apple.com/mr/podcast/energy-blindness-frankly-by-nate-…
As with all statistics coming out of Washington, unemployment is one of the most manipulated. Observe the homeless, the people who have lost jobs, yet can still not get unemployment, the young indoctrinated university graduates living in their parents basements, the discards from the Military Industrial Complex, the unvaccinated undesirables (non compliant), or the people living off grid to name a few. And you call $12 an hour (less taxes, social security and unemployment tax) working at McDonalds or Amazon, a job? A more accurate assessment through personal observation would have the rate above 20%.
If we don’t have a recession in NZ will the National supporters finally admit that NZ does better under Labour than National? We had high growth under Clark /Cullen and again under Ardern /Robertson (despite some very big obstacles), lower growth under Key /English and I think Bulger too. Maybe the right wing policy of low tax low investment is as crap as it sounds.
The high immigration, high land price policy coupled with a bloated, souless welfare state and net zero are taking us nowhere. If you still think this is a Nat/Labour thing the political parties have you right where they want you.
'Former laggards Turkey, Slovakia, Slovenia, Lithuania, the Czech Republic and Estonia have now moved past us – some well past us – and mostly just in this last decade. ...But of the five countries below us last year, three are likely to go past us in the next few years.
And if you think this is just a story about other countries doing really well – which we shouldn’t begrudge for a moment, it is something to celebrate – bear in mind that on these estimates New Zealand’s productivity growth rate in the 2010s was less than it was in the 1970s. That’s the New Zealand of Key, English and Ardern – oh, and record terms of trade – managing to underperform the New Zealand of Kirk, Rowling and Muldoon.'
' which we shouldn’t begrudge for a moment, it is something to celebrate'
They're joining in the depletion of a finite planet, hastening the inevitable collapse of what has been based on nothing more than exponentially-increasing extraction. We should be very worried.
And to reinforce your incorrect posit, you are reduced to quoting an economist. Says it all.
Having lived in a 3rd world country (and married a local) I do celebrate progress for poor nations. It means education, reductions in infant mortality, increased life expectancy and less back breaking toil. PDK and other commentators should try to understand walking miles every day just to collect firewood. It is a finite planet, resources cannot be exploited forever. However the solutions should be intelligent: reducing population, seriously minimising waste and maximising recycling; not keeping our 1st world foot hard on the downtrodden.
The world birth rate currently is 2.4 , half the 4.7 of 1950 .... so , it's happening by itself ... population growth at the moment is driven more by longevity , we're living longer ...
... give girls / ladies equal rights , an education , equal opportunities to jobs & business credit ... wallah ... birthrate plummets ... easy peasy , no draconian government intervention required ..
The debt fueled growth was created by government spending and low interest rates fueling speculation through debt, instead of growth by production (most of the western world). It does not matter what party you support, the politicians no longer 'govern' for the people, but govern for big business the very people that sponsors them. Clinton verses Trump was a great example of dividing the people, just as the vaccine apartheid was, keeping the people pre occupied from the real issues, all the while strengthening their public-private partnership.
Next will be the bogus global warming agenda, to stop people consuming our abundance of fossil fuels that have improved our standard of living and life expectancy. Labour, National tarred with the same brush!
The CIA - Real GDP (purchasing power parity)
.. in the 1970/80's we were told the same malarkey about Japan ... warned that Japanese ought to be a language offered in our schools ... America was finished , the tiger economies would surpass & lead ... yadda yadda ...
... and , it was all BS ... Japan's in a multi decade stagnation ... the US has gone from strength to strength ...
Not internally. Homelessness, crumbling unsustainable infrastructure, inflation, poor food nutritional value, massive income inequality, smog riddled cities, gun violence, drug overdoses but hey the Military and Medical Industrial complexes have gone from strength to strength...
That is the Russian and Chinese strategy, to drive a trade wedge so people can settle non USD non swift... eventually people will start to have to deal and hold FX Reserves in multiple currencies (They already do....) but no one trust China or Russia (not really even each other) hence the reason China has been developing its gold market so if you can settle in Yuan and quickly move it to Gold
There hasn't been enough gold to relate to global trading, for 120 years, perhaps longer. They faked it for a long time, before formally unpinning. A lesson there - physics trumps wishful thinking.
Mind you, where I think we are heading, that may no longer be the case.
The problem with the gold standard was that the USA started living above it's means, starting with the Vietnam war, which tax payers had no desire to pay for. The USA figured out they could just print up a bunch of fiat currency to pay for endless wars, rake up huge trade deficits and live way above it's means.
A million Kiwis are considering leaving NZ
https://www.newshub.co.nz/home/money/2022/07/cost-of-living-myob-poll-s…
That's only because they've been sold a bullshit narrative.
The temporary state of affairs - interestingly called 'rules-based order' these days, otherwise known as the First-World excuse for its repressions - is rapidly disintegrating (despite the heroic efforts of some to avoid this). The young haven't been told this; they've been told the trouble was Trump, Putin, a pandemic. They are all results, not causes. The projected story was a lie - should we be surprised Boris was elected in a desperate attempt to prolong the lie? He fitted the job-description perfectly...
As systems retreat from the high-water mark (and we are perhaps 14 years past that inflection-point; the inertia is to be found in infrastructure entropy), NZ will seem ever-more desirable. Those who strategise pragmatically, have realised this already.
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