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Markets at record highs ahead of US jobs report - business live US economy created just 148,000 jobs last month, leaving unemployment rate at 4.1% - business live
(35 minutes later)
Worryingly, the US under-employment rate rose to 8.1% in December, from 8.0% in October.
That means more Americans wanted to work more hours than they were able.
In better news, November’s non-farm payroll has been revised up to show 252,000 new jobs were created (up from 228,000).
But what the revisions give with one hand, they take with the other. October’s NFP has been revised down to 211,000, from 244,000.
Instant reaction - this isn’t a great jobs report. It’s not a disaster either.
Mediocre numbers.Jobs comes in at just 148K.Wages come in in line, but last month revised a tick lower.Unemployment steady but underemployment ticks higher. https://t.co/lr58ZiB7v6
Ouch
On wages..... earnings rose by 2.5% per year in December, as expected.
But November’s wage data has been revised down, to 2.4% (from 2.5%).
Breaking! The US economy created 148,000 new jobs in December.
That’s rather less than the 190,000 which economists had predicted.
The unemployment rate has come in at 4.1% - unchanged on last month.
More to follow.....
No argument....
This is definitely going to be the most exciting 2017 NFP report of 2018.
Just five minutes to go, and the excitement is building....
#EYETWITCHES
The US jobs report is notoriously hard to predict, and invariably revised sometime in the future.
But the Non-Farm Payroll is still one of the most eagerly awaited pieces of economic data in the calendar, as it gives an insight into how the world’s largest labo(u)r market is performing.
As Naeem Aslam of Think Markets puts it:
Today is the day- the most important economic data, the US Non-Farm Payroll number, on the face of the earth will reveal its colour.
This number sets the trading tone and the trend for the rest of the month for traders. Today’s number would provide us significant clues if the moderate growth in the US economy has left any impact on the jobs market, most importantly on the wage growth. Since the financial recession, the jobs market has been strengthening and this momentum was set by former President Barak Obama and Mr Trump is reaping the rewards.
World stock markets are at record levels today, partly thanks to Britain’s FTSE 100 hitting new heights this morning.World stock markets are at record levels today, partly thanks to Britain’s FTSE 100 hitting new heights this morning.
And Wall Street is likely to push the bull market even higher when trading begins -- unless the US jobs report is a shock.And Wall Street is likely to push the bull market even higher when trading begins -- unless the US jobs report is a shock.
Lukman Otunuga, Research Analyst at FXTM says:Lukman Otunuga, Research Analyst at FXTM says:
Another day, another record high for world stocks, as a growing sense of optimism over the global economy boosts risk sentiment.Another day, another record high for world stocks, as a growing sense of optimism over the global economy boosts risk sentiment.
Asian shares ventured higher during early trading on Friday, while European markets opened on a positive note amid the risk-on environment. With the Dow Jones Industrial Average surpassing 25,000 for the first time ever on Thursday, U.S equity bulls are clearly back in town and as such, we could see further gains on Wall Street this afternoon.Asian shares ventured higher during early trading on Friday, while European markets opened on a positive note amid the risk-on environment. With the Dow Jones Industrial Average surpassing 25,000 for the first time ever on Thursday, U.S equity bulls are clearly back in town and as such, we could see further gains on Wall Street this afternoon.
Investors on both side of the Atlantic are bracing for the latest US jobs report to hit the wires, in 35 minutes time.Investors on both side of the Atlantic are bracing for the latest US jobs report to hit the wires, in 35 minutes time.
December’s Non-Farm Payroll is expected to show that America’s economy created around 190,000 new jobs last month, leaving the unemployment rate at just 4.1%.December’s Non-Farm Payroll is expected to show that America’s economy created around 190,000 new jobs last month, leaving the unemployment rate at just 4.1%.
However, there is talk that the NFP could be better, after another survey yesterday suggested that US firms hired 250,000 people in December.However, there is talk that the NFP could be better, after another survey yesterday suggested that US firms hired 250,000 people in December.
Here’s a round-up of the latest Wall Street forecasts:Here’s a round-up of the latest Wall Street forecasts:
US NFP (Dec) 1330GMTUBS 205kCredit Suisse 200kRBC 200kScotia 200k SocGen 200kHSBC 195kExp. 190kCommerzbank 190kLloyds 190kMS 190k Nomura 190kBofA 185kDB 185kCiti 180kWell Fargo 180kBNP 175k GS 175kJPM 175kING 170kUS NFP (Dec) 1330GMTUBS 205kCredit Suisse 200kRBC 200kScotia 200k SocGen 200kHSBC 195kExp. 190kCommerzbank 190kLloyds 190kMS 190k Nomura 190kBofA 185kDB 185kCiti 180kWell Fargo 180kBNP 175k GS 175kJPM 175kING 170k
Economists will also be looking closely at the wage growth figures, for signs that the US economic recovery is reaching workers’ pockets.Economists will also be looking closely at the wage growth figures, for signs that the US economic recovery is reaching workers’ pockets.
Average earnings are expected to have risen by 2.5% per year, the same as a month ago, and by 0.3% in December alone.Average earnings are expected to have risen by 2.5% per year, the same as a month ago, and by 0.3% in December alone.
Craig Erlam of City firm Oanda says:Craig Erlam of City firm Oanda says:
We’ve been promised higher inflation and wage growth for some time and investors are increasingly not buying it.We’ve been promised higher inflation and wage growth for some time and investors are increasingly not buying it.
Even some policy makers are starting to question why nothing has not materialised and should that continue, rate hike forecasts will start to slip, especially with interest rates now already elevated. Today’s jobs report should offer some insight on this, with average earnings having arguably become the most important component of it. Still earnings are only expected to have risen by 2.5% compared to a year ago, below last year’s peak and well below where they need to be for inflation to sustainably return to target.Even some policy makers are starting to question why nothing has not materialised and should that continue, rate hike forecasts will start to slip, especially with interest rates now already elevated. Today’s jobs report should offer some insight on this, with average earnings having arguably become the most important component of it. Still earnings are only expected to have risen by 2.5% compared to a year ago, below last year’s peak and well below where they need to be for inflation to sustainably return to target.
Whatever happens, we’ll probably hear Donald Trump’s views through the usual channel....Whatever happens, we’ll probably hear Donald Trump’s views through the usual channel....
#NFPGuesses Beats consensus, Dow pops, Trump tweets#NFPGuesses Beats consensus, Dow pops, Trump tweets
The Labour Party is also voicing concerns about the drop in UK car sales last year.The Labour Party is also voicing concerns about the drop in UK car sales last year.
Rebecca Long-Bailey MP, Labour’s Shadow Business Secretary, says:Rebecca Long-Bailey MP, Labour’s Shadow Business Secretary, says:
“The Government’s mismanagement of the economy and mishandling of the Brexit negotiations has shaken consumer and business confidence and it’s concerning that the sales of new cars are falling.“The Government’s mismanagement of the economy and mishandling of the Brexit negotiations has shaken consumer and business confidence and it’s concerning that the sales of new cars are falling.
“The industry has been warning the Government time and time again and, as has become typical with the Tories, they have failed to listen or take action.“The industry has been warning the Government time and time again and, as has become typical with the Tories, they have failed to listen or take action.
“The British car industry is a vital part of our economy, directly employing up to 170,000 people. Labour’s Industrial Strategy will set out a radical programme of investment and genuine partnership between industry and government, to protect vital jobs and build an economy that works for the many, not the few.”“The British car industry is a vital part of our economy, directly employing up to 170,000 people. Labour’s Industrial Strategy will set out a radical programme of investment and genuine partnership between industry and government, to protect vital jobs and build an economy that works for the many, not the few.”
Here’s our financial editor, Nils Pratley, on the idea that markets are in a melt-up phase:Here’s our financial editor, Nils Pratley, on the idea that markets are in a melt-up phase:
Over in the City, the FTSE 100 index has climbed to new heights.
It just hit 7727 points for the first time, up 0.4% or 31 points today, as the global stock market rally continues to bubble away.
Markets have been surging in recent weeks, and there is plenty of talk that shares will keep rising as markets ‘melt-up’.
Rupert Harrison of asset manager BlackRock (and former top official in the UK Treasury), told Bloomberg TV that “there are very good reasons to be positive”
Harrisons says:
Since coming back from New Year, the phrase I’ve heard most is ‘melt up’.
There’s been a strong start to the year, and there are good reasons for that - the data is staying barn-stormingly strong.
There doesn’t seem to be any sign of the reversion to the mean that people had been looking out for.
On top of that, you’ve got tax cuts in the US juicing the prospects for earnings and also potentially boosting the Capex cycle we are in.
But, Harrison also cautions that there are some potential risks, including:
Everyone is ‘bought in’ to the idea that global growth will continue, so any slowdown could alarm investors..
Trade policy: Donald Trump must soon decide whether to take action against China over the alleged dumping of cheap metals and solar panels.
I was a guest host on @bsurveillance earlier with @flacqua and @tomkeene talking about bullish markets, the global economy and political risks, especially US trade policy https://t.co/vRXKBPbu7m
The US president is up early, and wasted no time in tweeting about the bull market:
Dow goes from 18,589 on November 9, 2016, to 25,075 today, for a new all-time Record. Jumped 1000 points in last 5 weeks, Record fastest 1000 point move in history. This is all about the Make America Great Again agenda! Jobs, Jobs, Jobs. Six trillion dollars in value created!
But as one City expert has already pointed out, each 1,000 point gain is less impressive than the last one.....
CNBC banging on about the fastest ever 1,000 point Dow rise in history. Obviously, by definition also the smallest percentage 1,000 point rise in history at only 4.17%. #marketsasshowbiz #lowquality
While diesel sales slumped by 17% last year, sales of alternatively-fuelled vehicles jumped by almost 35% as more people bought electric cars.
This shows that consumers are keen to drive less polluting vehicles, argues Greenpeace UK’s clean air campaigner Paul Morozzo.
He says:
“Sales of diesel cars are falling but sales of EVs and hybrids are growing at double-digit rates. Consumers are sending a clear message to the car industry that it’s time to move on from polluting diesel and the industry should listen to it.
Diesel cars have been fuelling a major air pollution crisis that has made our cities’ air toxic and harmful to breathe. EVs and hybrids are better for both air quality and the climate. If the UK car industry fails to invest in the technologies that consumers want then they’ll be left behind in the race for this trillion-dollar market.”
This charts hows how the market changed last year:
Back to cars, and Ana Nicholls of the Economist Intelligence Unit, has identified several reasons for the drop in sales last year:
Most people who can afford a new car have bought one recently, and pent-up demand from the auto market crash during the financial crisis is now completely sated. The average age of cars on the road is now less than eight years, so there’s little replacement demand.
Consumer confidence is faltering: with incomes nearly stagnant and the outlook uncertain because of Brexit people are becoming less keen to take out credit.
November’s rise in interest rates didn’t help, raising many people’s mortgage payments and making the financing deals from dealers less attractive
A drop in PPI claims has also cut the number of people with one-off lump sums to spend.
The sharp slump in diesel sales, after the VW scandal exposed concerns about NOx emissions. With the London congestion charge now higher, and the vehicle excise duty due to rise for the most polluting diesels, buyers are edging away rapidly. In the longer term there will be a shift towards electric cars, but at the moment sales (though fast-growing) are too low to make up the difference.
The latest inflation figures from the eurozone are out -- and they show that prices are rising more slowly than expected.
Despite the European Central Bank’s huge money-printing operation, eurozone inflation probably only rose by 1.4% per year in December, down from 1.5% in November.
Energy prices were up 3% year-on-year, down from 4.7% in November, while food, alcohol and tobacco inflation dipped to 2.1% from 2.2%.
This seems to vindicate the ECB’s decision to press on with its monetary stimulus -- which has been a factor behind the rise in stock markets recently.
Eurozone Inflation slows to 1.4% DEC y/y vs. 1.5% in NOV - Draghi has no reason to go hawkish
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Breaking away from the car sales figures.... we have good news for the UK economy.
UK productivity (basically how much each worker actually produces) jumped by 0.9% in the third quarter of last year, new figures show.
That’s the largest increase in productivity since April-June 2011, and may show that future growth will stronger than previously expected.
Labour productivity grew in both the services and manufacturing industries, according to the Office for National Statistics.
This looks like good news for the UK government. Last autumn, the independent Office for National Statistics slashed its forecast for productivity growth, having concluded that it would not recover to its levels before the financial crisis. Weak productivity leads to slower economy growth, smaller tax receipts and higher government borrowing.
But.... UK productivity has still taken a severe knock over the last decade, and basically flat-lined since the financial crisis.
UK labour productivity, as measured by output per hour, is estimated to have grown by 0.9% from Q2 2017 to Q3…but… pic.twitter.com/ONhWbEEKNP
Biggest rise in productivity Q3 for 6 yrs: encouraging but level wld have been 20% higher if pre-downturn trend continued. Stark blow to prosperity, long way to go
Unions fear that British car workers could be laid off this year, if sales don’t recover.
Tony Burke, assistant general secretary of Unite, says the UK’s “world class car workers” will be looking to the year ahead with trepidation”, adding:
“The government has caused confusion and damage with its policy on diesel cars and needs to start listening to the industry and workforce. Diesel engines produced by Unite members in the UK are the cleanest in the world.
“Ministers’ botched and badly thought through announcements are causing major damage to the industry. Combined with economic and Brexit uncertainty this risks taking the sheen off the jewel in the UK’s manufacturing crown and the 800,000 high skilled jobs it sustains.
2018 could be another bad year for the motor industry, if consumer confidence remains subdued.
Richard Jones, managing director of motor finance group Black Horse, says the next few months will be crucial
“I believe we’ll see new car sales continue to decline in the first quarter of 2018 given that this period in 2017 was so strong. This should help dampen fears of oversupply having a negative impact on used car prices and is positive in the long term by ensuring the new car market is operating from a sustainable position. I would also expect the used car market to continue to perform well.
“With uncertainties facing the UK economy it’s hard to make a confident forecast for 2018 as a whole. I believe a big test for the industry will come after quarter one when we will see how the underlying UK economy and consumer confidence is influencing car demand.”
Brexit is the biggest threat to the UK automobile industry this year, according to a new survey of car dealers from Close Brothers Motor Finance.
More encouragingly, 92% of dealers are confident about business prospects in the market for 2018, up from 63% last year. However, that optimism could wilt if Britain doesn’t agree a Brexit transition deal soon....