Here's our summary of key economic events over the weekend that affect New Zealand, with news the American labour market data for April seemed to have something for everyone.
But first, in the coming week it will be relatively quiet, especially on the US data front. But the Q1 earnings season is in its final weeks and still includes some major reporting. Elsewhere we will get set-piece central bank announcements from Sweden, England, Brazil and Malaysia, and of course from Australia tomorrow. China's CPI and PPI will also be released, but not until Saturday.
New analysis shows that American labour productivity is rising and at its quickest rate since the 1990s, and in 2023 that was its highest pace in half a century. It is too soon to credit AI, so this could be a new and important trend. Rising productivity is an essential precursor for rising standards of living.
But over the weekend, the US reported that their economy added only +175,000 jobs in April, on the headline, seasonally adjusted basis, the least since October and a deceleration compared to the upwardly revised +315,000 jobs added in March. It fell short of market expectations for a +243,000 increase. This data underscores a significant slowdown from the brisk pace observed in the first quarter and trails behind the average monthly gain of +242,000 jobs over the preceding 12 months. But between the two months combined the 'slowdown' is quite small.
But in fact, on an 'actual' basis employer payrolls rose +803,000 to 158.0 mln and a record high. On a household basis, including the unincorporated self-employed, they rose +234,000 to 161.6 mln and showing the continuing shift from self employment to company payrolls that we have observed in prior 2024 months. Either way, there are actually significantly more people employed that the headline levels suggest. Full time jobs rose, part time job levels shifted lower.
But the American labour force is growing slightly faster than these employed levels show so the jobless rate ticked up, very slightly admittedly, to 3.9% and although that is similar to last month it is at the upper range of what they have had since August 2023. (The New Zealand jobless rate was 4.3% in March 2024.)
Average weekly earnings rose +3.9% in April from a year ago, lower than the March level of 4.1%, so there are signs of less labour market pressure. (US CPI is 3.5%.)
And we should not forget that labour market data is a lagging indicator.
A leading indicator is a metric like the PMIs. And the ISM services PMI for April turned negative, dropping sharply to a contracting 49.4 in April from an expanding 51.4 in March. This is their first contraction in the services sector activity since December 2022, and it surprised markets who had expected a continuing expansion. But before we get too carried away, we should note that the new order component remained expansionary, so this overall drop might be just a blip.
The internationally-benchmarked US Markit services PMI is still showing an expansion, albeit a slower one.
So despite the headlines of a labour market and service sector undershoot, the markets liked the implications. Risk appetites returned with the S&P500 rising, bond yields falling, and the USD easing. Basically markets now feel US rate hikes are less likely as inflation pressures are easing - just as the US Fed itself seemed have suggested. The expectations of one 2024 rate cut late in the year are creeping back.
American vehicle sales came in slightly higher in April and the highest monthly sales rate since December, now at 15.7 mln, up +0.5% from the rate in the same month a year ago. For perspective, it reached an all time high of 21.7 mln units in October 2001 and a record low of 8.5 mln in April 2020.
In China, their publicly traded companies took a net profit hit for the first time in five years in 2023, as the protracted property sector slump bled into other industries. The roughly 5,200 non-finance companies listed in mainland China logged a combined net profit of NZ$655 bln last year, according to DZH data. This amounts to a -3% or -NZ$20 bln overall retreat. In Q1-2024 the decline swelled to -5% on that basis.
China returns from its "Labor Day" week of holiday, today. And there are no real signs their property market has bottomed out, as some claim. In fact, banks' mortgage books are now shrinking, undermining claims the market is stabilising.
Global real estate services provider CBRE first-quarter profit beat analysts' estimates for Q1-2024, helped by higher leasing demand at a time when commercial property sales remain under pressure from elevated interest rates. Their revenue rose +7%.
In Australia, eyes are turning to tomorrow's rate review by their central bank. No change is expected, but it will be closely followed for signals of the recently talked about rate rise possibility.
The UST 10yr yield is now at 4.51% and little-changed from Saturday. The key 2-10 yield curve inversion is still at -30 bps. And their 1-5 curve inversion is also still at -65 bps. Their 3 mth-10yr curve inversion is now at -88 bps and little-changed. The Australian 10 year bond yield is now at 4.42% and unchanged from Saturday. The China 10 year bond rate is unchanged at 2.31% but they are back from holiday later today. The NZ Government 10 year bond rate is now at 4.89% and unchanged as well.
The price of gold will start today up a minor -US$1 from Saturday at US$2301/oz.
Oil prices have stayed down at just under US$78/bbl in the US while the international Brent price is still just over US$82.50/bbl.
The Kiwi dollar starts today slightly softer from Saturday at just over 60.1 USc. Against the Aussie we are still at 91 AUc. Against the euro we are also little-changed at 55.9 euro cents. That all means our TWI-5 starts today just on 69.3 and down -10 bps from Saturday.
The bitcoin price starts today at US$64,262 and up +4.0% from Saturday and basically back to where it was a week ago. Volatility over the past 24 hours has been modest at just on +/- 1.3%.
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27 Comments
Currently spending some time in Singapore. Top 3 commonly cited local concerns:
- housing is crazy expensive. IF someone gets allocated a government subsidized apartment (and it's a big IF), you're looking at $500k (NZ) for a fairly average 2 bedroom apartment, and this is a 99 year leasehold title. If you want a freehold property, forget about it.
- cost of living has gone bananas and wages haven't come close to catching up
- they increased the population by 300k/5% last year alone (little less of an issue than the first two as they're fairly conditioned to foreign migrant inflow).
So that strikes the highly dynamic and well organized nation of Singapore off the list of preferred escape vectors.
It's all baked into the system, I tells ya
It's leasehold though. If you want freehold, spend 3x as much. There's over 100 2 bedroom apartments for sale in the Auckland CBD for under 600 grand.
Lucky they have way more people crammed into a smaller area, and super expensive car ownership, making decent public transport viable.
But leasehold is the norm there, and realistically does a freehold apartment really grant you much more rights than leasehold? Their leasehold is much less volatile that what you see here, since it’s government controlled
Putting aside tenure, that’s much more affordable
What are some examples of cost of living inflation?
I'm just passing on local anecdotes. You know, the same sort of things posted on here daily, as if they're somehow unique or specific, as opposed to virtually universal and unavoidable.
The Singaporeans I've spoken to have a strong preference for freehold, partially because the leasehold property, which still isn't cheap, is only going to depreciate as that 99 year expiry gets closer.
American labour productivity is rising?
Or is it? Corporates are selling goods and services for much more than they are spending - so they are generating more of a surplus (GDP). When GDP is increasing by more than total hours worked, you get an increasing labour productivity number.
The question to ask is how are corporates generating a higher surplus? The answer is relatively high levels of fiscal stimulus that the US Govt is pumping into the economy. As in NZ in 2021, our economies are geared to quickly transfer any inflow of credit money into the pockets of the already wealthy.
I emailed some economist friends in the US asking why the US seems somewhat out of step with other advanced nations. A common thread was 'onshoring'. Thus after 40+ years of offshoring jobs to cheaper overseas labour (and less regulation, e.g. environmental ), there's enough onshoring going on to change the dynamics. There is some anecdotal evidence that the onshoring isn't working out that well with US workers being a bit more demanding than expected.
The doco "American factory" provides a good illustration of the challenges re-shoring jobs.
The boost from the current re-shoring looks to be largely from the construction and activity of gearing up for the re-shoring, rather than the actual production of the re-shoring.
Yes, massive injections of public cash into US corporations + very generous tax breaks for building industrial / manufacturing capacity (Chips Act etc). I really enjoyed listening to Steve (the big short) Eisman discuss the current state of play on Oddlots recently. Well worth a listen...
https://www.bloomberg.com/news/articles/2024-04-05/steve-eisman-on-the-…
And we should not forget that labour market data is a lagging indicator.
Critical Data is Predicting 1-2% Interest Rates Are Coming, SOON
What would the price of oil be without Saudi Arabia's actions? What would Treasury yields be without the Fed? There is a way for us to determine what the underlying fundamental monetary and financial conditions really are which offers a rough approximation for both. Crude would be a lot less and market interest rates, let's just say there's no inflation whatsoever in these fundamentals.
China returns from its "Labor Day" week of holiday, today.
Travel boom in May Day holidays shows economic vitality, potential
So covid didn't hunt down people who didn't subscribe to experimental gene therapy - even in clinical trials at 10,000x the infectious dose. If you did take the gene therapy a chunk of the volunteers in the trial still went on to get less virulent "omicron" after the trial anyway.
"Our study demonstrates potent protective immunity induced by homologous vaccination and homologous or heterologous previous SARS-CoV-2 infection."
https://www.thelancet.com/journals/lanmic/article/PIIS2666-5247(24)0002…
Here is an explainer for you regarding the previously linked paper.
"Scientists tried to give people COVID — and failed
Researchers deliberately infect participants with SARS-CoV-2 in ‘challenge’ trials — but high levels of immunity complicate efforts to test vaccines and treatments."
The neighbour seeks trouble.
US assembles 'Squad' of allies to counter China
Manila warned of losing autonomy, 'Ukrainization' under US manipulation
Russia may be helping China prepare for an attack on Taiwan. Director of National Intelligence Avril Haines stated this in Congress, Bloomberg reports. She believes Russia and China are cooperating more closely on military issues, including a possible invasion of Taiwan. “This is the first time we've seen China and Russia cooperating on Taiwan and acknowledging that this is a place where China definitely wants Russia to cooperate with them, and we don't see any reason why they wouldn't,” Haynes said. Link
Appeal to authority.
Dr Kevin E Trenberth
"The issue is that methane is so short lived that in fact NZ is already at “net zero” wrt methane. The numbers of livestock have been stable enough since 2010 that the amounts emitted are completely compensated by the amounts oxidized to carbon dioxide. Since the methane started out as carbon dioxide in the atmosphere before being taken up in grass, and then eaten by livestock, the process is circular."
https://centrist.co.nz/nz-agriculture-has-already-reached-net-zero-lead…
https://www.interest.co.nz/category/people/kevin-trenberth
Interesting. The only question one might raise is what about the use of fossil fuel derived and produced fertilisers in livestock feed? That's not part of the circular process.
Kevin Trenberth seems like an onto it fellow:
For decades, Kevin Trenberth has been outspoken about climate change and the urgency to take action. One of his key messages has been: "It’s real, the problem is cumulative, and we’re causing it. Today’s blanket of greenhouse gases would disperse only over centuries. Cutting emissions is the most important of all possible responses."[30] And "we also have to build resilience to the new extremes".[30]
Yes, even a IPCC high priest doesn't buy the methane drivel the NZ political and media class push.
There are more important actual pollution reasons than "climate change" for not pumping on urea. Any carbon cycle claims about fert have to balanced with soil carbon changes.
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