Economy
The July Eco Watchers Survey confirms Japan’s strong economic momentum, while nascent overheating keeps pressure on the BoJ. The survey’s current conditions component beat estimates, rising to 45.7 from 44.0. The outlook component was slightly below estimates…
The evidence is increasingly clear that swings in labor supply, mostly related to immigration enforcement policy, have been the primary driver of nonfarm payroll growth during the past two years.This remained true in the July report which showed declines in both nonfarm employment (-23k) and the unemployment rate (from 4.19% to 4.09%). The driver of both moves was a 264k drop in the size of the labor force.When labor supply is this volatile, we should downplay measures of job growth and pay more attention to measures of labor market utilization.Measures of labor market utilization look broadly stable. The unemployment rate is trending down, but the prime-age (25-54) employment-to-population ratio has weakened, and the numbers of marginally attached and involuntary part-time workers are rising.We don’t think this morning’s jobs report reduces the odds of a September rate hike which, in our view, remain high. Next week’s July core CPI report will be a more important driver of near-term Fed policy.Please click here to access our US Labor Market Chartpack for more details on US employment trends.
China does not produce too much. It spends too little. The only viable way for China to reduce investment without raising unemployment is by lowering national savings. Doing so is likely to be politically challenging, however. This suggests that China will suffer from subpar growth and deflationary pressures for the foreseeable future.
The July ISM Services report missed estimates but showed decent underlying growth without signs of overheating. The headline index was below consensus but still ticked up to 54.1 from 54.0 in June. Business activity and new orders increased, while employment…
The July ISM Manufacturing survey confirms that US growth remains healthy without overheating, supporting a tactical overweight on equities relative to bonds. The headline index rose to 55.6 from 53.3 in June, beating estimates. The increase was driven…
Despite today’s hold, the bar for a rate hike in September remains low and contingent on the next two core CPI reports.
July flash PMIs show developed-market growth broadening. The US composite jumped to an eight-month-high 53.6 from 51.9, matched by services at 53.6 (up from 51.2); both beat estimates. Manufacturing eased to 53.8 from 53.9, a three-month low that missed…
China's economy is slowing, but policymakers are unlikely to deliver broad-based stimulus in H2. Our China strategists expect China's economy to muddle through H2 as investment and domestic demand stay weak, with policymakers unlikely to deliver broad-based…
Most Fed and pundit assessments of inflation expectations are overly narrow, focusing too much on long-term market-based measures. We favor a more qualitative approach that asks whether the inflation outlook is influencing household and business decision making.