Here's my summary of the key events over the weekend that affect New Zealand, with news of very strong results in the American labour market.
In fact, there was a surprisingly strong July non-farm payrolls report. After a low May report, their economy delivered a second consecutive month of very strong hiring and rising wages. The three-month moving average is now an impressive 200,000, well above the neutral level of around 60,000. And one key sector where hiring is much stronger in both the services sector and the trucking industry.
Consumer credit data was also released over the weekend, showing +4.1% growth. This is slower than at any time in the past 4 years, but that may be because real wages are growing. The main restraint on consumer credit came from student loans, and car loans, and we know that car sales are rising strongly.
Clearly their expansion is strengthening, not ebbing, as it enters its eighth year. Equities surged to new highs on Wall Street with the S&P500 hitting a new record, experts expressed more confidence that the Fed was likely to raise interest rates before the end of the year, and it was clear that long-stagnant wages for ordinary workers were rising at the healthy pace of +2.6% pa and higher than their inflation rate.
Actually, it is just possible that the RBNZ may view this strong US data as locking in another rate hike there, and that could lower the chances of one here on Thursday.
In New York, accounting firm PwC is facing an existential threat. A US federal judge rejected their bid to dismiss a US$1 bln lawsuit accusing the accounting firm of professional malpractice for helping cause the October 2011 bankruptcy of MF Global, a brokerage once run by former New Jersey Governor Jon Corzine.
In Panama, the inquiry the government there ordered in the wake of the Mossack Fonseca 'Panama Papers' leak has been thrown into turmoil as both its high profile inquirers quit accusing the Panamanian Government of undermining their work.
In New York, UST 10yr yields jumped to 1.59%, a six week high, following the non-farm payrolls report.
The US benchmark oil price is unchanged at just under US$42/barrel and the Brent benchmark is over US$44/barrel.
The gold price fell sharply however, down US$24 to US$1,336/oz.
The NZ dollar is down against a resurgent greenback, and will start the week at 71.4 US¢, at 93.7 AU¢, and at 64.4 euro cents. The TWI-5 index is at 74.7.
If you want to catch up with all the local changes on Friday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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10 Comments
When examining inflation, for example, from the view of this “best jobs market in decades” it doesn’t make any sense. How can the labor market be so robust and yet inflation in either the PCE Deflator or the CPI (or anything in between) instead fall? If you take the Establishment Survey as valid, then you will view inflation as a temporary factor of oil prices that can’t be related to your view. If, however, you view the economy from outside the BLS framework, calculated inflation starts to make perfect sense, including oil prices. Read more
The RBNZ still cut, my fear is that the statement is muted, as a result of US Data or just because Wheeler is too bullish NZ, and the cut is wasted. To be fair to Wheeler ex inflation and dairy the economy isn't exactly crying out for a rate cut, hard to be bearish.
You are correct. People can't survive on part time job income in the US. Most jobs have transitioned to full time positions working 40-50 hours at $9/hour (just an example I saw someone complaining about 47 hours at $9/hour this morning).
Too bad there's little productivity to show for the full time jobs.
I am not sure you are right, either. The non-farm payrolls survey shows "In July, average hourly earnings for all employees on private nonfarm payrolls increased by 8 cents to $25.69." See data here. That is an average of full time and part time. That's a rise from July 2015 from $25.03/hour. ($25.69/hour is US$53,435 per year = NZ$75,250 pa.)
I am not disputing that there are some American workers on low wages. But the vast majority are not, and the average pay levels are rising.
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