Here's our summary of key economic events over the weekend that affect New Zealand, with news of a slight easing of labour market pressure in the US, but the long predicted recession still seems far away.
But first in the week ahead, it will get started slowly with the US currently on its long end-of-summer Labor Day weekend. We won't see them back in international financial markets until Wednesday, NZT. Then they will deliver their ISM Services PMI, factory order data, and foreign trade data. Elsewhere, Australia and Canada will announce interest rate decisions. Also, inflation rates will be released in Turkey, South Korea, the Philippines, Mexico, and Russia. GDP growth figures will be released for Australia, South Africa, and Switzerland. Additionally, we will get service sector PMI readings for China from their private Caixin series..
Over the weekend the August non-farm payroll report showed that American labour markets are still expanding although not as fast as previously.
The US economy added +187,000 jobs in August, compared to the downwardly revised +157,000 in July and more than market expectations of +170,000. These are the headline, seasonally-adjusted changes. It was the third consecutive month with job gains falling below 200,000, indicating a gradual easing of American labour market conditions, largely attributed to the Federal Reserve's significant interest rate hikes aimed at cooling inflation. There is a downshift, but it is a smooth one - so far at least.
However as regular readers know we also look at the original data and that rose +268,000 to 156.4 mln people on company payrolls, a new record high and up +3.0 mln from a year ago. Meanwhile there are 161.4 mln employed when you also account for the unincorporated self-employed, up +2.7 mln in a year, so that indicates a shift into company jobs. It is this overall longer-term and sustained surge in employment that is making the American economy so resilient.
Over the past year, average weekly earnings rose +4.0%, and while that is still rising faster than inflation, it is at a slightly slower pace than in previous months.
Meanwhile, the widely-watched ISM factory PMI 'improved' slightly, meaning it contracted less. In fact it has now contracted for a tenth consecutive month. Recall on Friday the internationally-benchmarked Markit PMI came in with a very similar result. Basically their factory sector is in a shallow trough and analysts are suggesting it will climb out of it from here.
Also in a trough is the Canadian economy. Their Q2 GDP data was released over the weekend and it did not grow from Q1. It is however now +2.2% higher than year-ago levels.
In China, the Caixin factory PMI surprised with a small expansion, when a small contraction was anticipated. Given the official factory PMI out earlier showed a contraction, this is a double surprise. The Caixin survey has been volatile about the 50 point mark for a number of months now. Their survey noted a rise in new orders overall and the downturn in new export orders easing. This wasn't what the official factory survey found however. But both surveys noted that selling prices are still falling.
Out soon will be the official data on Chinese home sales. The anecdotal evidence is that volumes will be very weak. But the official stats are unlikely to suggest anything but a 'stable situation', trying to keep the risk of market panic under control.
In Hong Kong and the Pearl River delta, they are bracing for a second typhoon in less than a week. The cost of the first one is being counted in the billions.
EU factory PMIs don't look flash at all, with factory orders shrinking disarmingly fast. But this is essentially a German and French problem. Country-level data showed that positive sentiment was strongest in Ireland and Italy, followed by Greece, offsetting the pessimistic outlooks at firms in Germany, France and Austria. Meanwhile in the UK, their factory situation is absolutely terrible.
In Australia, new home loan lending fell -2.3% in July from June to be -14% lower than a year ago. This same metric fell -3% in June and was expected to bounce-back in July, but that didn't happen. Lending for commercial property dived -33% on the same basis as lenders took fright at how that sector could hurt bank exposures.
Globally, the price of wheat continues to retreat, back to levels we first had in 2007. For growers, they have suffered significant inflation since then. (48% over the whole period.) Generally, global food prices have fallen back to 2021 levels.
The UST 10yr yield will start today still at 4.18%. A week ago it was 4.24%. Their key 2-10 yield curve is holding at -69 bps. And their 1-5 curve inversion is unchanged at -109 bps. Their 3 mth-10yr curve inversion is also holding -120 bps. The Australian 10 year bond yield is now at 4.04% and down -1 bp from Saturday. The China 10 year bond rate is holding at 2.62%. And the NZ Government 10 year bond rate is now at 4.89% and unchanged.
The price of gold will start today at just under US$1940/oz and back down a mere -US$1 from Saturday.
And oil prices are holding higher at just over US$85.50/bbl in the US. The international Brent price is now at US$88.50/bbl.
The Kiwi dollar starts today unchanged from Saturday, still at 59.4 USc. Against the Aussie we are very slightly firmer at 92.2 AUc. Against the euro we are also marginally firmer at 55.2 euro cents. That all means the TWI-5 is still at about 68.7.
The bitcoin price is up +1.1% today from this time Saturday, and is now at US$25,885. Volatility over the past 24 hours has been very low at just on +/- 0.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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36 Comments
I worked in Immigration for 4 years a long time ago. There was an old guard in charge (non-pc, right leaning) that ran a tight ship. Immigration wait times were low, (to get a decision) processing was clear, hurdles (quality of English, sponsorship etc) were very clear and held to.
They have retired in due course and it appears that an appropriately diverse and culturally sensitive set have replaced them.
Late 90's. As I mentioned they retired, they were in their late 50's when I worked with them.
I mention it because it was one of the best run government departments I have worked for, it appears to me (from the reporting) that the fall from this level has been near total.
I think the immigration 'scandal' defines low skill immigration in general...who ever is in goverment,as was student visas as a back door to residency allowing shady employers to exploit their own people,i.e "paid for 20 hrs,work 60 and have to pay for accomodation,fees for all and sundry and hold their passports"
Was it just Labour, though? I was dealing with INZ back in 2015/2016, and even then INZ were just [slowly] rubberstamping people as long as the company had was a registered sponsor - I dealt with several IT companies who were rejecting NZ candidates for all manner of reasons - none of which related to the candidate's skillset - but seemed mostly to be due to getting Indian imports who were $30+kpa cheaper, and had to give some reason to reject the local candidate.
I proposed to the minister that if a suitably skilled NZer was rejected by a prospective employer, said candidate should be able to report it to INZ and the company's sponsorship revoked.
Personality tests in particular should be outright banned in recruitment processes - not liking the candidate's personality is not the same as an absence of skill - though my favourite excuse for a rejection by an INZ-approved company was 'we don't think this career path will suit the candidate' - after the candidate had flown through all their tests.
Yes, this! I have been involved in hiring IT people for a decade or more and I get disgusted at some of the practices of opting for foreign cheaper workers over locals. I can think of only one time where it has turned out better, a particularly good Indian candidate when the locals that applied were fairly low quality, now they are a Microsoft MVP, real talent. A few times where the candidate has been middling. And dozens of other times the imported candidate has been horrible, either outright lying about their skills and 6 months later we push them out and end up hiring a local anyway. Its stupid HR and bottom line focused idiots that are box checkers only, rife throughout the industry. The number of times I have said to different HR people "Yeah, but they basically failed my technical questions, so aren't an option" only to be over-ruled by non tech people who think we can just upskill people into senior positions, no matter how useless they currently are.
YeAh BUt ThEiR CV SayS ThEY CaN COde... FFS
We have a similar problem in the built environment sectors as well - good candidates from overseas are hard to come by. The low barriers to entry at our universities don't help either and clearly dish out advanced degrees to international students with poor language skills and subpar technical prowess.
Then the problem is aggravated by poor management culture in the sector, where penny-pinching employers are always looking to squeeze more out of migrant workers for less - even the good ones who deserve to be looked after.
Do you have the same problem where the penny pinching at the start ends up costing them much more than if they just did the right thing to start with? I see this repeated again and again in IT, they get forced to do the right thing eventually to deliver a project, costing the original cost/time +inflation. But they wasted half of the original budget and doubled the delivery time because they thought they could be "smart" at the start by penny pinching.
Agree. This is an IT problem. IT workers are seen as high value workers and therefore easily gain work permits. It is much easier for employers to import fully trained and experienced staff from Indian or Sth Africa and pay them a fraction of the salary than it is to train locals. The immigrants work for a year on a low rate then quit for a much higher paying salary somewhere else. Meanwhile our IT grads sit on the bench.
It's been both National and Labour for over 20 years now.
The only party that interrupted it was COVID.
I actually hoped we would stamp COVID out again so they would keep the boarders closed (for immigration, not citizens) for longer because I could see housing supply catching up with demand and rents were falling in Auckland (they aren't now).
The UK manufacturing situation seems to be an example of "be careful what you precisely and very carefully wish for...you may bloody get it".
Hopefully the brexit-voting (manufacturing heart land) recently unemployed can pivot as well as the last manufacturing hollow-out, we could do with a follow up to "Red Red Wine".
I'm very much an LOC voter, but always doubted Michael Wood. His lack of 'real world' experience and apparent naivety is proving costly. The world is changing/ has changed and NZ needs to move away from the nostalgia of having once upon a time left our house doors unlocked.
Or knowing that the the risks associated with the fast track approach on balance would outweigh benefits. Yes, his decisions were on official advice but naive and of course driven by populism. Our immigration settings are a shit show.
I'm not just talking about mean streets of just Delhi.
His lack of 'real world' experience and apparent naivety is proving costly.
Like many NZers who reach positions of power with little in the way of having actually done anything - being on committees is not 'doing something' - the arrogance is palpable and they tend to believe their own BS. Wood, Chippie, Xindy. Willis also terrifies me. People will point out she worked for Fongterror. The roles were Govt Affairs, Strategy Deployment, Stakeholder Affairs - yes these are kinda jobs but smells like bureaucratic directing to me.
In the case of the migrants, it's sad. People's lives are being destroyed. The bureaucrats don't give a rats and unfortunately neither do many NZers.
US jobs numbers just keep booming as more people are tempted back into the labour force - despite all the esteemed economic advisors and commentators saying that unemployment would need to double to get inflation down (inflation has since dropped to 3% whilst jobs have boomed).
How is this inflation-reducing, economic boom possible? My view...
- Govt is deficit spending as it invests massively in infrastructure (and pays interest on trillions of floating rate debt) - so the economy is running hot
- Household spending is almost immune from high borrowing costs because they fixed their 30-year mortgages at around 3%
- Inflation was always and everywhere about choked supply chains and rapidly shifting patterns in demand (durables vs services for eg)l. Now, supply chains are unblocking, and the hot economy means that businesses are expanding to meet additional demand, which is increasing competition and economies of scale
Meanwhile in NZ, we continue to pursue the mind-numbingly stupid inflation-fighting strategy of 'load cost onto people and businesses and protect the financial wealth of the wealthy'.
Indeed! What sort of moron thinks being pro extinction is a policy winner? Maybe the quality of voters is also an issue?
https://www.nzherald.co.nz/kahu/the-good-oil-from-seymour-about-gas-exp…
Nailed it! The path we have gone down including virtue signalling, is mind bogglingly stupid. Using our own energy resources while we develop a sound strategy away from fossil fuels makes so much more sense.
Besides, in the long run, I would suggest that we don't have to stop using them completely, we just cannot be as dependent on them as we are. They should be used for perhaps only 1 or 2% of our transport needs. As hydrogen technology develops, that level may drop lower.
you were making sense till you bought up Hydrogen, the silliest of all methods of moving energy around. Unless we find a source of 'white' hydrogen we should stay the hell away from hydrogen except where its captured as a byproduct of some industrial process we would be doing anyway.
No. Recently I've read quite a number of articles on energy alternatives, and in the longer term hydrogen is the only one that makes sense. Granted the technology is not available yet to produce it easily and cheaply, but it is coming (https://newatlas.com/energy/ucf-methane-to-hydrogen-carbon/). But hydrogen cannot fully replace hydrocarbons. Batteries at best are only an interim solution, and potentially are an ecological disaster in waiting. Unless there is some new, as yet undiscovered, source of cheap energy coming available very, very soon, we have to look to hydrogen.
But even then I am concerned that at this stage, even that will possibly be too late to stop and reverse the rapid increase in global temperatures that we are causing. There are some seriously hard choices needing to be made across the planet that, frankly, I cannot see being made as they require total global consensus. Population has to be at the top of that list.
Hydrogen production has to overcome the losses to be really considered, you are lucky to be able to use 30% of the energy used to create it, once all the electrolysis/storage costs have been taken into account. If this Aussie firms claims aren't bull dust, then it might be possible: https://www.theguardian.com/australia-news/2022/mar/16/australian-resea…
Methane to hydrogen still requires us to dig up enormous amounts of natural gas, which won't do anything for global temps. The technology you refer to would require enormous amounts of atmospheric surface area exposure to actually sequester methane directly from the air as its a trace gas in the atmosphere. Best application would probably be at rubbish tips where it's concentrated or if we were to somehow able to capture ruminant gases at source.
No,no. It was the correct article. Thing is, when the hole you are digging is leading to biosphere collapse, civilisation collapse, anyone with an iota of gumption would understand the first step is to stop digging. The expectations built up in the electorate by political shysters are incompatible with reality. It's a vicious circle. Sales pitch promising the impossible, voters expecting delivery, government tossed for the next bunch of clueless hucksters.
They have not 'taken money out of their economy' - quite the opposite, Govt has injected 3 trillion in a year so demand deposits (transaction account balances) are actually up on last year. NZ balances are dropping quickly - 10% down from last year.
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