90 seconds at 9 am: Good US jobs trend

90 seconds at 9 am: Better-than-expected US jobs data; bond yields rise; Japan advances; oil benchmarks reset; NZ$1 = US$0.769, TWI = 73.9

8th Jul 13, 8:44am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including some improving global news.

The American job market chalked up solid progress in June with better than expected results, bolstering evidence that their economy might be strong enough to grow with less help from the Federal Reserve.

The data sent bond investors rushing to sell as US Treasuries reached their highest yields in two years. The US Federal Reserves tapering plans completely overshadow the bond market.

The rise in yields threatens big bank capital as bond prices fall and banks who are required to hold this paper as part of their capital will need to write down their 'investments'.

Japan seems to have some wind in its sails, at long last. The initial optimism about Abenomics seem to be being borne out.

Growth may be picking up marginally in the US and Japan, but it is tracking the other way in emerging economies says the IMF. They are saying they will be lowering their 2014 forecasts because of the trend.

Portugal has pulled back - temporarily at least - from a government collapse by patching together a political deal to sustain their euro-zone bailout plans.

Oil prices remain high as US benchmark prices rise to match international levels - but curiously US petrol prices are not rising too. Infrastructure changes now allow US Midwest oil flows into the international markets. At the same time, natural gas prices continue their relentless fall as supplies grow.

The rises in our petrol prices are due to self-imposed tax increases, and a falling currency rather than crude oil price rises.

Gold fell back again in late trading in New York.

The NZ dollar starts today sharply lower at 76.9 USc on the US jobs report and it is under 77 for the first time since June 2012, 85.2 AUc, and the TWI is at 73.9.

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13 Comments

by Stephen Hulme | 8th Jul 13, 9:20am 1373232003

In June, job growth occurred in leisure and hospitality, professional and business services, retail trade, health care, and financial activities. (See table B-1.) Leisure and hospitality added 75,000 jobs in June. Monthly job growth in this industry has averaged 55,000 thus far in 2013, almost twice the average gain of 30,000 per month in 2012. Within leisure and hospitality, employment in food services and drinking places continued to expand, increasing by 52,000 in June. Employment in the amusements, gambling, and recreation industry also continued to trend up in June (+19,000).

Debt funded employment extending domestic consumption detracts from the mix when it comes to settling the bulging current A/C deficit, unless tourists are the consumers of the services on offer. Yeah Right! Click here for for some graphic hilarity.

Why wouldn't one sell the bonds - the waiters are never going to buy or service the liability.

by scarfie | 8th Jul 13, 9:39am 1373233168

Interesting that oil has broken the multi year triangle pattern to the topside. I don't know that charting is all that valuable in manipulated markets, but it could get real ugly if the pattern break holds true.

by andyh | 8th Jul 13, 9:53am 1373234028

Re: US gas (petrol) prices. Perhaps it would be better if you actually quoted data about what US prices actually ARE rather than an article about what the EIA are guessing they MIGHT be in the next few months.

For the source data:

http://www.eia.gov/petroleum/gasdiesel/

You will see that US petrol prices are UP 14c a gallon (4%) from this time last year. Generally the trend so far this summer is for petrol prices to be around 3-4% higher than the same time last year.

Your contention ''At the same time, natural gas prices continue their relentless fall as supplies grow'' is bizarre (I assume you mean US natural gas prices).

Natural gas prices hit a low of $1.94 back in May 2012. They currently stand at around $3.6 (nearly 45% off their 5 year low). They have drifted down from recent highs ($4 hit earlier in the year when the US had terrible late Spring weather) but that is almost certainly related to the onset of summer. US gas prices have bounced around between $3-$5 for most of the last 4 years:

http://www.infomine.com/investment/metal-prices/natural-gas/5-year/

Relentless fall? Really?

Honestly, what passes for comment/analysis of the oil and gas markets on interest.co.nz is simply too poor to be believed.

by Andrewj | 8th Jul 13, 3:09pm 1373252975

Andy, last year prices in CA almost made $5, this year is way lower, around the $4

http://www.californiagasprices.com/GasPriceSearch.aspx

by andyh | 8th Jul 13, 4:09pm 1373256591

Come on Andrew, not like you to be so imprecise. California prices did indeed hit $5 but that was in OCTOBER 2012 - we are still only in July as far as I am aware.

The link I provided gives you the year on year comparison (see the graph to the right as well as the table):

http://www.eia.gov/petroleum/gasdiesel/

PADD5 prices (which include California) show prices 18c higher than the equivalent week in 2012. It remains to be seen whether they go above $5 later in the year but at the moment they are more expensive than they were a year ago. Since there is a degree of seasonality in US petrol prices year on year comparisons are the valid ones.

by Andrewj | 8th Jul 13, 4:44pm 1373258669

Imprecise is my middle name, thanks for putting me right. Locala were expecting it to hit $5 for the holiday season.

Im in NZ at the moment, hell it's expensive.

by Wolly | 8th Jul 13, 10:07am 1373234828

And now for the real US jobs report....!

http://globaleconomicanalysis.blogspot.co.nz/2013/07/establishment-survey-jobs-195k.html

by south paw | 8th Jul 13, 10:45am 1373237101

"195,000 jobs added in June. 107,700 of those in retail, restaurants or amusement parks."

http://www.maxkeiser.com/2013/07/jobs-jibber-jabber/

by Roger Witherspoon | 8th Jul 13, 10:11am 1373235079

http://www.zerohedge.com/news/2013-07-07/most-expensive-gas-world

This has a couple of brilliant charts.

Guess which nation of petrol heads spends almost as much as a percentage of income as the US?

Something seriously wrong here.

by Stephen Hulme | 8th Jul 13, 10:39am 1373236740

And it's not as if we can sustainably export fund our purchases of the vehicles and the fuel - we remain comically way out of our league - but I suppose another foreigner will get hold of our infrastructure and hollow it out with debt financing, eventually leaving us with a shell demanding government borrowing to sustain the bare minimum of essential services.

And of course those foreign outfits with loads to lend will debt finance the purchase of imported vehicles, which will double the price after all the other mandatory service providers take their share.

by JimboJones | 8th Jul 13, 10:47am 1373237231

Guess which nation of petrol heads spends almost as much as a percentage of income as the US?

Its hardly surprising - in other countries a lot more people get around on electric trains meaning less petrol consumption per capita. Also our average income is pretty low but unlike a lot of poorer countries we still have to pay international rates for our fuel.

by steven | 8th Jul 13, 12:47pm 1373244431

Yes, we are dispersed, in the EU the density of the cities is supposed to be higher and hence they use less petrol, that and its heavily taxed. I think the difference in our petrol to poorer countires is they hardly tax and in some cases subsidise petrol.

regards

by steven | 8th Jul 13, 12:52pm 1373244757

In what way (wrong)?

regards