October 4, 2019
United States:
U.S. Payrolls, Wages Miss Estimates in New Sign of Downshift
“U.S. hiring missed projections in September and wage gains cooled, offering a warning that the record-long expansion is poised for further slowing even as the jobless rate fell to a half-century low. Private payrolls expanded by 114,000 after an upwardly revised 122,000 advance the prior month, according to a Labor Department report Friday that missed the median estimate of economists for a 130,000 gain. Total nonfarm payrolls climbed a below-forecast 136,000, which was boosted by 1,000 temporary government workers to prepare for the 2020 Census count. Average hourly earnings rose 2.9% from a year earlier, the weakest in more than a year and missing estimates. The jobless rate unexpectedly dropped to 3.5% from 3.7%, for the lowest since December 1969. Even with the unexpectedly shaky jobs and wage figures, traders of fed funds futures slightly reduced the amount of easing they expect from the U.S. central bank this year and marginally trimmed their expectations for an October cut amid a lower-than-expected unemployment rate. U.S. stock futures rose and Treasuries fell. More broadly, the downbeat reading adds to signs President Donald Trump’s trade policy and weakness abroad pose an increasing threat to growth in the world’s largest economy. At the same time, the unemployment rate decline gave him a chance to boast, which he promptly did on Twitter minutes after the report. “Overall it is a bit of a mixed bag,” Torsten Slok, Deutsche Bank Securities chief economist, said on Bloomberg Television. But the main payrolls number along with weakness in manufacturing add to signs that the trade war is putting “downward pressure both on hiring and the economy.” The jobs report caps a week of U.S. economic data that whipsawed stocks and sent already-low Treasury yields tumbling, led by a key manufacturing gauge that sank deeper into contraction with the worst reading in a decade. A slowdown also threatens Trump’s re-election prospects next year, with the president frequently staking his message on a strong economy. The data offer a contrast with characterizations by Fed Chairman Jerome Powell and his colleagues at recent meetings that job gains have been “solid,’’ though they may still have room to stick with that assessment. Late Thursday, Fed Vice Chairman Richard Clarida said the economy remains on solid footing and recession risks aren’t “particularly elevated under appropriate monetary policy.” ”
Europe:
Boris Johnson Commits to Sending Brexit Extension Letter, Court Told
“Prime Minister Boris Johnson agreed to seek an extension to the Brexit deadline in the event that there’s no accord, a Scottish court was told, in a filing that appears to contradict his earlier statements that he would do no such thing. Johnson made the commitment to request an extension by Oct. 19 as long as all the obligations under the so-called Benn Act are met, said Aidan O’Neill, an attorney for the government’s opponents. They are asking a court in Edinburgh to force him to obey the law. Last month, Johnson said he’d “rather be dead in a ditch” than ask the European Union to delay Brexit again. Having staked his reputation on leaving by that date with or without a deal, Johnson has little room to manoeuvre. He’s lost his majority in Parliament, hasn’t won a vote in the legislature and suffered several court setbacks. The undertaking came after Johnson had repeatedly refused to confirm that he would abide by the legislation seeking to prevent a no-deal Brexit. A spokesman for Johnson referred to earlier comments made by the prime minister where he said the government will both obey the law and leave by October 31. O’Neill in court said such statements are irreconcilable. In Edinburgh, the challengers, who include English tax lawyer Jolyon Maugham, are arguing that Johnson can’t be trusted. The repeated threats by Johnson and his cabinet to leave the EU by any means necessary means the court is allowed to force him to obey or face a fine or imprisonment, O’Neill said. “We are concerned that those threatening words are shortly going to be translated into unlawful deeds,” O’Neill said.”
Asia:
U.S. Trade Gap With China Narrows as Exports Hit Five-Month High
“The U.S.’s merchandise trade deficit with China narrowed in August as exports rose to a five-month high, a possible sign of goodwill from the Asian nation as the countries try to resolve their trade war. The goods-trade gap with China shrank to a seasonally adjusted $28.9 billion from $29.6 billion a month earlier, according to data released Friday by the Commerce Department. Exports increased to $10 billion while imports declined slightly to $38.9 billion. The overall U.S. deficit in goods and services trade widened to $54.9 billion in August, more than expected. The bigger overall gap reflects a rise in imports, particularly consumer goods including mobile phones, which could result from President Donald Trump’s Aug. 1 announcement of a 10% tariff on a further $300 billion in Chinese imports. Overall imports of consumer goods were a record $57.2 billion in August. The trade war with China, and the uncertainty that surrounds it, have disrupted companies’ supply chains, increased input costs and delayed investments in hiring and investment. Companies, cognizant of looming price increases, tend to import more before announced tariffs take effect. Even with the latest figures, imports and exports with China have declined significantly since the trade war began in 2018, making China the third-largest U.S. trading partner this year behind Mexico and Canada, after it was No. 1 in 2018. So far this year, the U.S. merchandise deficit with China has narrowed to a seasonally adjusted $238.4 billion from $270.1 billion in the same eight months of 2018. Since the end of August, the trade war has escalated substantially. Additional levies went into effect on Sept. 1, with others set to rise or take effect Oct. 15 and Dec. 15. Chinese officials are set to visit Washington for trade talks next week. Overall exports increased 0.2% to $207.9 billion, including industrial supplies and foods. Imports rose 0.5% to $262.8 billion. The trade gap in petroleum shrank to a record low of just $321 million as exports rose and imports declined. Excluding petroleum, the goods trade deficit widened to $72.7 billion. Exports and imports of goods account for about three-fourths of America’s total trade; the U.S. typically runs a deficit in merchandise trade and a surplus in services.”
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