The ADP employment report showed that private firms shed a net 254 000 jobs in September, following a decline by 277 000 jobs (earlier reported at 298 000). The market was slightly more optimistic, counting on a 200 000 decline (Bloomberg) or 240 000 decline (Dow Jones). This means that the market should already count on a weaker payrolls number than the consensus of -180 000. Although slightly disappointing, the September loss is the smallest since July 2008. Job losses in the service sector amounted to 103 000, while 74 000 factory jobs were lost.
The Chicago PMI disappointed profoundly, as its headline index declined unexpectedly to 46.1 from 50 previously. This suggests that the activity is again shrinking in the manufacturing sector in the Chicago area. It follows a number of other surveys like the Richmond and Philly Fed surveys that showed a decent headline figure but contained signs of underlying weakness. The details fully confirm the headline with new orders, order backlogs and production substantially lower. This is a bit disconcerting for those like us who count on a strong first phase of the recovery. While the Chicago PMI is quite volatile and sometimes unreliable as predictor of the ISM, recent evidence put the risks for the ISM for a decline from the 52.9 reading of August instead of a rise to 54 as suggested by the consensus estimate.
EMU: German unemployment continues to surprise
EMU inflation dropped in September to -0.3% Y/Y from -0.2% Y/Y previously, according to the flash estimate. The outcome was below the consensus estimate for stabilization at -0.2% Y/Y. However, the outcome wasn’t unexpected anymore after the releases of the German, Belgian and Spanish reports. A similar message came from the Italian HICP, released today. Inflation rose by 0.6% M/M and 0.3% Y/Y, falling short of expectations for a 0.7% M/M and 0.4% Y/Y increase. For details of the EMU HICP we have to wait for the final report.
German unemployment continued to surprise in September, as the state agency reported a 12 000 decline in September, following decreases by 5 000 and 7 000 in the previous months. The unemployment rate dropped to 8.2% from 8.3% previously and is barely up from the 7.6% low of the cycle. Have the labour market laws been repealed? Normally unemployment continues to rise well into the cycle, while the latter is now still in the bottoming out phase. The reason seems to be that firms used the subsidized system of short shift workers to avoid lay-offs. The figure for short shift workers lags the unemployment figures by three months. While in June the number of short shift workers dropped, it was the first monthly decline but at 1 433 000, the figure is still up almost 1 400 000 since October 2008. The number of vacancies has gradually decline from a peak of 665 000 in January 2007 to 468 000 currently, but in recent months the decline slowed sharply and the level is still close to the 2000 peak. Also the decline of employment slowed in recent months, notably to 4 000 in August, from 15 000 in July and 36 000 in June.
