US jobs report beats forecast, but German factory orders slide - as it happened
Non-Farm Payroll report beats expectations, but wage growth remains tepid
- Latest: US jobs report beats forecasts
- American labor force swells by 224k
- But wage growth disappoints
Earlier:
3.15pm BST
Time for a recap:
Commenting on today's productivity figures, Head of Productivity @KatKent_ONS said https://t.co/ff7wdqNxd8 pic.twitter.com/K1qSxhUjf6
.@KatKent_ONS continues https://t.co/yn3k1DkDNU pic.twitter.com/1c6zpukOa1
2.51pm BST
Alastair Neame, senior economist at the CEBR thinktank, believes the White House will get its interest rate cut soon:
Today's boost to overall job numbers may just about be enough to stay the Fed's hand for the time being as trade tensions between the US and China have cooled since the G20 summit last week.
Nevertheless, an uptick in the unemployment rate and the absence of faster wage growth indicate that the Fed are still more likely than not to act before the end of the year.
2.50pm BST
Larry Kudlow, White House Economic Advisor, has welcomed today's jobs report.
We are still in a very strong prosperity cycle. It's a growth cycle, it's a prosperity cycle.
Things are looking pretty good.
2.43pm BST
Ding ding! Wall Street has opened in the red.
The Dow Jones industrial average has shed around 100 points, or 0.4%, as traders rethink the chances of sharp interest rate cuts.
2.30pm BST
Oof! The surge in the US dollar has dragged sterling down to a six month low, at just above $1.25.
As you can see, Brexit worries have been pulling the pound down in recent weeks.
2.27pm BST
Alex Hunter of Capital Economics reckons today's jobs report means the Federal Reserve won't cut interest rates this month - and will wait until the autumn.
He writes:
The 224,000 gain in non-farm payrolls in June was much stronger than the consensus estimate of 160,000 and would seem to make a mockery of market expectations that the Fed will cut interest rates by up to 50bp late this month. Employment growth is still trending gradually lower but, with the stock market setting new records and trade talks back on (for now at least), the data support our view that Fed officials are more likely to wait until September before loosening policy.
Admittedly, the headline payrolls gain was flattered by a 33,000 jump in government in employment, with private payrolls rising by a slightly more modest 191,000. Even that was far stronger than most had been expecting, however, with hiring in the business services and education sectors leading the charge.
2.16pm BST
More reaction to the jobs report:
US jobs data shows why there is no need to cut rates at all.
+224,000 non-farm payrolls in June much stronger than the consensus estimate of 160,000.
+170,000 average in past 3 and 6 months.
+3.1% wage growth
Yields rising across the curve as markets price out #Fed cuts pic.twitter.com/JxXGwl0qT8
BREAKING NEWS: Dow futures fall 100 points after strong jobs report dampens hope of a Fed rate cut
2.09pm BST
Gold is another casualty of this strong jobs report:
#Gold < USD 1400! #payrolls pic.twitter.com/W8sQzH3vXW
2.08pm BST
2.01pm BST
Edward Moya of trading firm OANDA is confident that America's Federal Reserve will cut US interest rates later this month, even though the jobs market looks solid.
Today's non-farm payroll shows labor market is still getting tighter despite the unemployment rate ticking higher from the 49-year low as the participation rate rose. Trade tensions are not really hitting the labor market yet, but lack of international investment in the US will eventually hit the data points. The Fed never makes a decision off of one economic data point and the narrative remains inflation is subdued, and global growth concerns are heightened.
Despite the strong rebound in jobs and steady wages, the Fed will still likely deliver a 25-basis point insurance cut at the end of the month.
1.58pm BST
Market still sees a rate cut in July, but the probability of a 50bps cut just went from 25% to ~7% pic.twitter.com/bUhAne3ENh
1.55pm BST
Richard Flynn, UK Managing Director at Charles Schwab, agrees that the US labor market looks strong...but there's still plenty to worry about.
"Today's healthy job numbers have exceeded market expectations and show renewed momentum following last month's weak performance, which should be enough to calm fears of a near-term recession.
"Nonetheless, investors still face uncertainty around slowing global economic growth and an ongoing U.S.-China trade war, despite assurances at the G20 that talks would resume. Economic data has yet to reflect a significant impact from trade concerns, but that's unlikely to last if the stalemate drags on, or another round of tariffs is imposed.
1.49pm BST
The US dollar is rallying - another sign that investors think this jobs report is too strong to justify a massive interest rate cut this month.
The Federal Reserve is still expected to cut borrowing costs, but probably only by 0.25%.
Market expectations of a 50bps rate cut this month just fell by half after the jobs report. (But the market is still pricing 100% chance of a cut of some kind.)https://t.co/nSeLJmmyeE
1.44pm BST
Investors are reacting to the Non-Farm Payroll report by selling bonds, and preparing to ditch shares when Wall Street opens in 45 minutes.
Why such a negative reaction, when job creation has gone up? Because they reckon it takes some pressure off the Federal Reserve to cut interest rates twice this year, as some had hoped.
This jobs report creates a complicated picture for the Fed. Inflation is still unimpressive, but the headline number suggests a still-strong U.S. economy. https://t.co/9CzKFDb5Q4 2-year yields tick higher. pic.twitter.com/4mi3jMjUIN
1.42pm BST
There was widespread job creation across America last month, according to today's Non-Farm Payroll report.
The Labor Department says:
Payroll employment increases by 224,000 in June; unemployment rate changes little at 3.7% https://t.co/NsuHovcqn0 #JobsReport #BLSdata
1.37pm BST
The US unemployment rate has inched up to 3.7%, from 3.6% in May.
That may be due to more people looking for work -- the labor force participation rate has risen to 62.9% from 62.8%.
1.34pm BST
Wage growth remains disappointing, though.
Average earnings rose by 0.2% in June alone, weaker than the 0.3% expected. That means wages were 3.1% higher than a year ago, not 3.2% as hoped.
1.31pm BST
NEWSFLASH: The US economy created 224,000 new jobs in June, more than expected, as job creation bounced back after slowing in May.
More to follow....
1.27pm BST
Excitement is building.... partly because Non-Farm Payroll is notoriously hard to predict (and notoriously often revised in future months).
NFPs in 5 minutes; Expected 160k in new jobs. Prev. 75K
1.10pm BST
Stephen Hubble, Chief Analyst at Centtrip, points out that the latest survey of private sector job creation (from ADP) was disappointing earlier this week.
Today's non-farm report may confirm that the US labour market is going through a rough patch, he says:
"If the NFP release follows the ADP number and comes in below the forecast of 165,000 jobs added, that will shake the Dollar and will strengthen the case for an interest rate cut by the Federal Reserve later this month.
The impact could be even more pronounced as the US has just celebrated the Independence Day and traders will inevitably be taking vacations, so lower liquidity can often lead to higher volatility in markets."
12.55pm BST
Tension is mounting in the markets as investors prepare for the monthly US jobs report, due in half an hour.
The Non-Farm Payroll is expected to show that job creation picked up in June. On average, analysts predict the NFP rose by around 162,000, up from a disappointing 75,000 last month.
The impression that employment growth has slowed will only be challenged by a real barnstormer of a figure, that would contrast with what we're seeing in other labour market indicators.
Today's #NFP report could be a turning point for the stock markets touched all-time highs recently and may provide support for the #USD on a reassessment of #Fed's rate cutshttps://t.co/zaq9DUE0ct pic.twitter.com/3il0j25dZv
Markets quietened down in anticipation of the US Nonfarm Payrolls: there is a danger that this lull will be like a compressed spring that will shoot after the data is published.
Primary Dealer #NFPGuesses
BNP 220K
Citi 194K
Jefferies 185K
RBC 180K
GS 175K
Mizuho 175K
SocGen 175K
Natwest 170K
UBS 170K
MS 169K
Wells 165K
BMO 160K
Daiwa 160K
Deutsche 160K
BAML 155K
HSBC 155K
Barx 150K
TD 150K
Nomura 145K
CS 140K
JPM 140K
Scotia 100K
Dealer Median: 162.5K
12.42pm BST
Shares in German industrial giants have fallen this morning, as investors fret about the slump in orders.
Manufacturing conglomerate Siemens is leading the fallers, down 3.2% this morning, followed by engineering and steel giant Thyssenkrupp (-2%), material science group Covestro (-1.9%) and building materials group HeidelbergCement (-1.8%).
12.01pm BST
This morning's slump in German factory orders continues to worry economists and investors.
Many fear that Europe's largest economy is weakening. Here's more reaction:
Plunging factory orders have inflamed concerns about German growth, and further data due Monday could add to the worries. A preview of the upcoming industrial output release by @EricCulpLS: https://t.co/7el6lcXtOo #EURUSD HT @PantheonMacro for the chart pic.twitter.com/02L4fUmbZa
German new factory orders slump, likelihood of further stimulus (rate cut) increaseshttps://t.co/q5GJD38jGq
German factory orders declined by 2.2% month-on-month in May, much worse than market expectations but in line with that signaled by PMI numbers. June's figures suggest a further contraction in the manufacturing sector. Read more here: https://t.co/waYP9qsoNk pic.twitter.com/Cn2jQEnugG
11.27am BST
Britain's productivity problems have had a severe impact on wage growth.
According to the ONS, the average worker would be earning 5,000 per year more, if productivity had maintained its pre-crisis growth rate, rather than being so weak over the last decade.
We've calculated that based on market sector averages, if productivity had grown in line with its long-term trend, and wages as a share of income had remained constant, average market sector wages today would be just over 5k higher for the average worker https://t.co/FK7qeUJZNs
"UK productivity fell again in early 2019, continuing the falls seen in the second half of 2018. This is very disappointing for the economy, and deeply worrying for people's living standards prospects.
"Labour market productivity is now almost 30 per cent below the pre-crisis trend. This dismal record has been the single biggest driver of the stagnation in living standards over the last decade.
10.21am BST
How are business leaders supposed to commit to major project when they don't know how Brexit will be resolved?
That's the message from Tej Parikh, chief economist at the Institute of Directors, who blames political uncertainty for Britain's productivity woes:
"The UK's dire productivity performance shows no signs of letting up.
"With political risks clouding business decisions, firms have lacked the confidence to invest in the equipment and technology that drive efficiency gains in their organisations. Even if the clouds of uncertainty do lift later this year, it will be a while before pent-up investment activity filters through to the productivity numbers.
Labour productivity in Q1 2019 - as measured by output per hour - decreased by 0.2% compared with the same quarter in the previous year https://t.co/8lWKf8aCZh pic.twitter.com/4LNjobU16q
10.18am BST
This chart highlights that UK productivity weakened because British workers collectively worked 2% more hours in January-March, but only boosted output by 1.8%.
10.09am BST
Britain's productivity woes are partly caused by companies taking on low-paid staff, rather than splashing out on better equipment, says Howard Archer of EY Item Club:
Part of the UK's recent poor labour productivity performance has undoubtedly been that low wage growth has increased the attractiveness of employment for companies.
It is apparent that many companies have preferred to take on labour rather than commit to costly investment, given a highly uncertain economic and political outlook, magnified by Brexit since mid-2016. The low cost and flexibility of labour relative to capital has certainly supported employment over investment.
10.01am BST
Bad news! Britain's productivity has fallen for the third quarter in a row.
Labour productivity (how much output was created for each hour of work) shrank by 0.2% in the first quarter of 2019 compared with the previous year, according to the Office for National Statistics.
9.38am BST
The slump in German factory orders has dampened the mood in the markets.
The main European indices are all down slightly, as investors ponder whether central banks will unleash their firepower soon to prop up growth.
The big news of the day is the sharp decline in German factory orders, down 2.2% in May versus estimates for a 0.2% decline. This will worry the European Central Bank and raise expectations of more monetary stimulus in the near future.
"In the UK, the FTSE 100 fell 0.2% to 7,590 with miners sinking on renewed concerns about the global economy and how that might impact commodities demand. Rio Tinto, Anglo American and Evraz were among the biggest fallers on the FTSE 100. Housebuilders were also out of favour."
9.21am BST
German factories aren't the only ones struggling.
New data shows that Asian factories suffered a sharp downturn last month. Industrial goods production across the region shrank at the quickest pace in nearly seven years, data firm Markit reports.
Asia Sector PMI indices signal sharp downturns in Industrial Goods and Metals & Mining sectors in June, and a continued decline in automotive output. Quickest expansions in the Banking and Transportation sectors. More here: https://t.co/Rt0P9wZBI6 pic.twitter.com/iOBUjSppRK
9.18am BST
Understatement of the morning:
That's unfortunate. A 2.2% drop in May pulled German factory orders down to an 8.6% yoy decline. pic.twitter.com/A4cWhdCBdF
9.03am BST
While German factories struggle, UK industry can celebrate good news -- Jaguar Land Rover has just confirmed it will build an electric version of its Jaguar XJ saloon at its Castle Bromwich factory.
Related: Jaguar Land Rover to build electric XJ car at Castle Bromwich plant
8.37am BST
Bloomberg is worried that global trade uncertainty is driving Europe's economy into a "more serious downturn".
The German economy ministry reported huge declines in export orders and investment goods in May, just days after a survey showed factory activity shrank for a sixth month in June.
The continued gloom is increasing concern at the European Central Bank, and a growing number of economists are predicting it will add more monetary stimulus as soon as this month.
Ouch! German Factory Orders plunge amid persistent trade uncertainties. Manufacturing orders fell 2.2% vs. estimate for 0.2% drop. Drop in demand led by export orders and investment goods. https://t.co/xb8rgwQgjQ pic.twitter.com/HNwhK4iuzf
8.28am BST
This slump in factory orders is bad news for Germany's economy, says Katharina Utermihl, senior economist for Europe at Allianz SE.
She is worried that global trade tensions (with the US and China yet to resume negotiations) are hurting:
In particular, the outlook for foreign demand has deteriorated considerably. The tentative spring recovery in global trade has thus turned out to be very short-lived. In view of the lingering trade uncertainties and elevated inventory levels, a swift recovery for German industry is not in the cards. Germany's export economy, which is strongly geared to industrial goods, will clearly remain under pressure.
So far, domestic demand has been holding up relatively well, but it is only a matter of time before the weakness in industry also affects investment activity and consumption in a more pronounced manner. Overall, we expect GDP growth for Germany of only 0.8% in 2019.
Interesting side aspect to weak German factory orders is the impressive resilience of consumer goods supporting the consumption outlook, but the headwind from the much larger investment & intermediate sectors easily outweighs that. pic.twitter.com/AGw0LVRzwj
7.52am BST
Carsten Brzeski of ING is aghast to see that German factory orders have shrivelled so badly in May.
The great order book deflation continues. Devastating new orders data just undermined any hopes for an industrial rebound. We are starting to lose our optimism. Instead, the order book deflation just reached a new standard.
In May, new industrial orders dropped by a painful 2.2% MoM, from a slightly upwardly-revised 0.4% MoM increase in April. After two positive months and hopes for a bottoming out, the downward slide is back again. On the year, new orders were down by 8.6%; the worst YoY drop since 2009.
Combined with the weakest June performance of the labour market since 2002 and disappointing retail sales, today's new orders wrap up a week to forget for the German economy. The fear factor is back.
Germany: Order book deflation continues | Snap | ING Think - The great order deflation continues and wraps up a week to forget for the German economy. https://t.co/sqe3cja65S
7.47am BST
John Hardy of Saxo Bank fears that Germany's economy is in recession:
New cycle low in German Factory orders - down -8.6% YoY in May and -2.2% MoM... Germany in recession
7.43am BST
This tumble in German factory orders suggests its economy struggled in the last quarter, warns Oliver Rakau of Oxford Economics:
Yet again a horrible German factory orders report. The -2.2% m/m drop in May was still better than our -3% call, but much worse than the consensus of about stagnation. Core orders fell 3% after a strong April and a lack of bulk orders weighed further.
From a near-term perspective the 1.2% drop in turnover is even more concerning given its usual tight correlation with industrial production (released on Monday). This will add to the gloom on Germany Q2 GDP growth prospects.
7.39am BST
7.38am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Domestic orders increased by 0.7% and foreign orders fell by 4.3% in May 2019 on the previous month. New orders from the euro area were down 1.7%, new orders from other countries decreased 5.7% compared to April 2019.
In May 2019 the manufacturers of intermediate goods saw new orders fall by 1.5% compared with April 2019. The manufacturers of capital goods showed decreases of 2.8% on the previous month. For consumer goods, a decrease in new orders of 0.7% was recorded.
German Factory Orders (May) decline 2.2% M/M and 8.6% Y/Y
another ugly number...
Frankfurt, we got a problem. pic.twitter.com/pLcViKvC29
The positives and negatives that will decide Greece's elections. @NickMalkoutzis looks at the forces pushing New Democracy towards victory and SYRIZA to defeat on Sunday https://t.co/5gqyBaIvle #Greece #elections pic.twitter.com/redk4UFzKj
Continue reading...