Here's our summary of key economic events overnight that affect New Zealand, with news the strength of the American labour market just rolls on and on
The US economy unexpectedly added +253,000 jobs in April, beating forecasts of +180,000 and following a downwardly revised +165,000 in March. But these are the headline, seasonally-adjusted numbers. On an actual basis, the month-on-month rise was +892,000. There are now 161 mln people employed in their workforce, a new record high and up +3.1 mln from year-ago levels. 155.3 mln are on employer payrolls and 5.7 mln self-employed in unincorporated businesses. The 'self-employed' level is near a record low over the past decade if you exclude the March-July 2020 pandemic emergency period.
Average weekly earnings rose at a +5.8% annualised rate in April from March. It was an unexpected improvement and is a faster rise than in any month in the past year. The jobless rate dipped to 3.4% and their participation rate is unchanged at 62.6% so there remains plenty of capacity for more improvement.
By any measure this is a strong labour market, confounding the doomsters yet again.
This strong labour market is supporting non-housing consumer credit growth which came in higher in March than expected. Total consumer debt rose +US$26.5 bln from the prior month after an upwardly revised +US$15 bln increase in the previous month and the March levels were well above market expectations of a +US$16.5 bln rise. This data is also not supporting bear scenarios.
None of today's data will be welcomed by the Fed. It does not indicate that inflationary pressures will be easing soon from a slowing economy.
And finally in the US, we can note that the three banks that recently collapsed - Silicon Valley bank, Signature Bank, and First Federal Bank, were all audited by KPMG and all gained clean audit statements just prior to their failure. They all also had stable credit ratings (investment grade BBB for the first two, B+ junk grade for First Federal), probably largely based on the audit assurances. The US Fed has acknowledged serious regulatory listakes, but neither the auditors nor the credit ratings agencies have done so.
Across the border, Canada's labour market delivered a stronger-than-expected result too, adding +41,400 jobs when +20,000 additional were expected. But there was a downside - all those additional jobs were part-time roles. Their jobless rate is hovering near a record low for them.
The China, the Caixin services PMI came in at the same level as the official services PMI, both measures recording a healthy expansion.
After nine years of fitful trials, the PBoC is finally getting its digital yuan off the ground. Some provincial governments allow trade in the e-yuan. And now public employees are being paid in e-yuan, direct to their phone wallets. Users can also directly transfer funds just by tapping another phone (even if internet signals or coverage is weak or down). Banks or credit card companies not required for daily transactions?
In the UK, shareholders voted down the proposal by its largest shareholder Ping Ang (and backed by Beijing) to split off the Asian business. Few shareholders other than Ping Ang supported the idea. But because it is a move wanted by Beijing, HSBC is entering murky waters in Hong Kong and China. Overnight, President Xi called for more party control over the economy, centralised in Beijing. (In their language, "further strengthen and improve the centralised and unified leadership of the Party Central Committee on economic work.") While the call wasn't specifically aimed at HSBC, they will find it very tough resisting it.
Singapore's retail activity rose +2.2% in March and a sharp deceleration of the February rate. They will be concerned about that fall away. Given they have inflation running at +5.5% and the retail data is nominal, that suggests real retail activity is down -3.3%.
The EU is suffering declines in retail activity too, down -1.2% in March from February, down -3.8% from year ago levels. This data is inflation adjusted.
In Germany there has been a very sharp drop in factory orders, led by orders for large engineering products. This has been the biggest drop in industrial orders since the height of the pandemic in April 2020.
In Australia, the RBA's Monetary Policy Review doesn't see inflation returning to its policy range until ... mid-2025. They acknowledge the current 7% is too high but they are in no rush to rock the boat to fix that problem. They seem more worried about weak housing markets than inflation stealing savings. Perhaps they are trying to inflate their household debt away? They seem to have little tolerance for meaningful action on inflation.
Lending for owner-occupied homes in Australia rose +5.5% to A$16 bln in March from February, logging a positive month-on-month gain for the first time in ten months and defying expectations for a -1% decline. Still, March’s figure was -25% lower than for March a year ago. A fast-recovering housing market seriously complicates the RBA's efforts to tackle inflation
All eyes in Australia are now on the May 9 (Tuesday) Federal Budget. Expectations are high for new initiatives aimed at helping households deal with inflation - while themselves not causing more inflation.
And we should probably note that the iron ore price has now fallen to a six month low.
The UST 10yr yield starts today at 3.44%, and up +7 bps from this time yesterday. A week ago it was at 3.43%. Their 2-10 yield curve is more inverted at -47 bps. Their 1-5 curve is little-changed by -134 bps. But their 3 mth-10yr curve is now very much more inverted, now by -198 bps and hurt by the impending debt limit shenanigans. The Australian 10 year bond yield is now at 3.41% and up +14 bps from this time yesterday. The China 10 year bond rate is down -4 bps at 2.74%. This is actually a six month low and an unusual daily dip. And the NZ Government 10 year bond rate is now at 4.13%, and that is down -3 bps from this time yesterday but only back to week-ago levels.
Wall Street is up +1.9% on the S&P500 in its Friday trade, buoyed by the extended strength of the American labour market. And the woes from regional bank stocks seem to be fading now. For the week, the S&P500 is down -0.7%. Overnight, European markets were all up about 1.3% except London which rose +1.0%. Yesterday Tokyo was closed for a holiday. Hong Kong rose +0.5% yesterday and Shanghai fell -0.5%. Both recorded most weekly gains. Yesterday, the ASX200 ended down a minor +0.4% gain to end the week down -1.2%, while the NZX50 ended Friday down -0.7% for a weekly -1.1% loss.
The price of gold will start today at US$2014/oz and down -US$32 from this time yesterday. A week ago it was at US$1991/oz. (Remember its all-time high was US$2070 on August 6, 2020, so no longer threatening that.)
And oil prices have risen +US$2.50 from yesterday to be just under US$71.50/bbl in the US. The international Brent price is just over US$75/bbl. These are -US$5 lower than week-ago levels.
The Kiwi dollar is holding unchanged against the USD and now at 63 USc. Against the Aussie we are -½c softer at 93.5 AUc. Against the euro we are unchanged at 57.1 euro cents. That means the TWI-5 is now at 70.6 and down -10 bps from this time yesterday but up +70 bps in a week.
The bitcoin price is firmer again today, now at US$29,557 and up another +2.5% this time yesterday. But that only takes us back to where we were this time last week. (-0.2%) Volatility over the past 24 hours has been modest at +/- 2.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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32 Comments
No end to US labour market expansion
Ignore The Noise: Job Market Is Cracking As Birth-Death Model "Adds" Near Record 378,000 Jobs
It’s also noteworthy that there continues to be a significant divergence between household employment (which counts employees) and the payrolls survey (which counts jobs). Over 1.2 million more jobs have been created than new employees since March last year. It’s not a vote of confidence in the jobs market if a rising number of people feel they need more than one position to pay their way.
Because, I would suggest, there is allowed to exist a version of democracy , in a minority and both convenient and opportunistic for a faction in parliament that primarily exists according to racial selectivity. What this is though, more worryingly, is a harbinger of the sort of shambolic, unaccountable and separatist movement, that will take the form of the government that Mr Hipkins thinks the good folk of New Zealand deserve.
"Something is rotten in the state of Denmark"
Although I am not sure what or why.
Whaitiri Jumps Waka, but didn't Waka Jump, but did, but didn't, but not really, technically speaking, but did, but the speaker is not sure, and the one party that pushed for, and enacted the Waka jumping law doesn't know either and wont push for her to be removed.
Kerekere resigns as a List Party Member and retains her seat? but under what right?
A vote with your feet seems to be the only meaningful vote these days.
What is does do though is add a whole heap of integrity and credibility to the late MP from Hamilton Dr Sharma. Not only did he honour the rules himself, but it is quite obvious that in the process, he has both exposed and confirmed the hypocrisy and shenanigans in this Labour government, adjoined by the Greens and let’s not forget, National too up until recently. Sorry state of affairs indeed.
A few people had a bit of a laugh yesterday when I mentioned Pepe coin. One person said they checked the price and was glad they didn't invest.
Its up 105% this morning. $1.5B trading volume. On binance now.
I wouldn't buy this (at this price this is, I bought a while ago) but I wonder if this heralds the start of new money coming back into crypto as the risk profile of investors starts to come back.
The other point is that Ethereum is up 6%. Perhaps because of the extreme gas fees ($100 in Eth just to do a single trade!). And that Eth is burnt forever.
I think meme stocks and coins have become a market for speculators and will feature in news indefinitely from now on. Who doesn't want to be part of the next big thing at the ground floor.
The speed at which information travels means you only need a financial sparrow fart somewhere and people will pile into whatever outlet someone has deemed the antidote.
A few people had a bit of a laugh yesterday when I mentioned Pepe coin. One person said they checked the price and was glad they didn't invest.
Pepe is always going to be too much for normies. And that's understandable. And as I'm sure you understand Wolfie, it is the personification of degen culture. Now people may say that's wrong but I disagree for a number of reasons:
1. This is hugely disruptive and to play around with Pepe is how that disruption manifests itself in the 'real world'. That angers the tradfi world because they're not in control. For normies, it's outlandish and all they see is big numbers with no idea how this is being played.
2. Even if you're part of the crypto community on any level, it doesn't mean you accept Pepe or even speculate on it. Being part of the community you develop a subset of different attitudes, beliefs, and behaviors.
3. Events like the emergence of Pepe do not discredit crypto. They raise awareness, involvement, and acceptance. And that will bother those in the ruling elite who want people to only follow behaviors that enrich the ruling elite and their mates. There is a subversive element to the likes of Pepe that normies in particular will not understand.
Although from my experience people using the word "Normie" to describe others usually want to call themselves "nuerodivergent" or something.
The word 'normie' is in the crypto community to describe those who are not in the space but often have misguided and limited understanding of the space; for ex, they will say things like 'what if you lose your USB stick' as a weakness of owning crypto.
It's not derogatory in any way and can be quite amusing.
I think if one group comes up with their own word for another group and claims it's not derogatory, they're being disingenuous.
It's not disingenuous at all and the use of 'normie' is not derogatory. Like the example I gave, people who believe that crypto assets are stored on USB sticks lack fundamental understanding of what a blockchain is and could be referred to as a 'normie'.
I don't see how that could be considered offensive in the slightest.
Or it’s just that us normies can see that a meme based currency is plain stupid and pure speculation paid for by the last ones that buy in.
Do you honestly see a world where people use Pepe to buy stuff?
If people started investing in the Zimbabwean dollar because it had a stupid picture on it I’d consider that crazy too. so it’s not specific to crypto.
don’t get me wrong I’m sure there is money to be made, just like people made money out of tulips once upon a time.
Or it’s just that us normies can see that a meme based currency is plain stupid and pure speculation paid for by the last ones that buy in.
Do you honestly see a world where people use Pepe to buy stuff?
This is correct. Pepe is pure speculation with no meaningful function such as buying goods and services. You've got it.
But that is the whole point of its existence.
don’t get me wrong I’m sure there is money to be made, just like people made money out of tulips once upon a time.
Also correct. Let's say a digital native teenager has digital tokens that he or she wants to use for speculation on Pepe. There are a range of different outcomes, including losing some or all of their digital assets. People shouldn't make the assumption that these people are making irrational choices because you don't personally see any underlying value in an asset like Pepe. That's also similar to people who don't understand why other people spend an inordinate amount of time playing League of Legends.
I was reading on Bloomberg that this is the 13th consecutive month that US employment has beat economists estimates. I'd suggest the US employment market is bulldozing all expectations as rapid demographic change means fewer workers per consumer: https://data.worldbank.org/share/widget?indicators=SP.POP.1564.TO.ZS&lo…
In Germany there has been a very sharp drop in factory orders, led by orders for large engineering products. This has been the biggest drop in industrial orders since the height of the pandemic in April 2020.
#Germany is weighing a reduced power price of 6 cents per kilowatt-hour for certain energy-intensive industries to help manufacturing-heavy econ. Measure expected to cost €25-30bn & last until 2030. Small & medium-sized firms currently pay ~27 cents/KWh. https://bloomberg.com/news/articles/ Link
French data: Industrial Production m/m Mar: -1.1% versus est -0.4% and prev 1.4% Industrial Production y/y Mar: -0.1% versus est 1.1% and prev 0.9% Manufacturing Production m/m Mar: -1.1% versus est 0.0% and prev 1.3% Manufacturing Production y/y Mar: 0.7% and prev 1.8% Link
I see Nick O'Kane got a A$58m bonus struck yesterday. Almost double what he got the year before. And for doing what? Not from producing anything physical, but by correctly getting the numbers on the right-hand side of a spreadsheet to add up to a bigger number than the ones on the left.
And who paid for his well-earned bonus, on top of his already exceptional salary? Those that do produce something physical - the farmers, builders, taxi drivers and shopkeeper who have taken on more Debt to send it in his direction. And Nick is by no means on his own.
Now that's an oversimplified analogy, of course. But the problem is - we are creating money - Debt - in a fashion that bears no resemblance to the productive underpinnings of the global economy. An as has always happened through history - one day that stops. Or more precisely the whole lot collapses.
So the question must be - how close are we to that day?
At some point the Fed will realise that rate hikes in the US are almost certainly net stimulatory - until they break the financial system.
We are also seeing that we can achieve full employment at levels last seen 50 years ago. We just have to ignore the economists more often.
If so, the government (whatever hue they are) will just keep pumping more immigrant labour into the economy, supporting the housing market either directly or indirectly (through rental demand). What’s happening in Australia at the moment will be coming to New Zealand soon.
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