US: payrolls show upward surprise in August
According to the official payrolls report, US employment fell by 54 000 in August, significantly less that expected, while also the previous two figures were considerably upwardly revised (from -131 000 to -54 000 in July and from -221 000 to -175 000 in June). All revisions taken into account, the payrolls were 174 000 above expectations. While the outcome was materially better-thanexpected, payrolls growth remains of course disappointing and substandard compared to previous recoveries. The breakdown show that the decline in employment was based in the government sector, which fell by 121 000, still an effect of layoffs due to the 2010 census. Private payrolls, on the contrary rose by 67 000, while an increase by 40 000 was expected and also last month’s figure was upwardly adjusted (107 000 from 71 000). Looking at the private sector, goods-producing stayed unchanged in August as the construction sector added 19 000 jobs, while 27 000 jobs were lost in manufacturing, which might still be an effect of seasonal adjustment factors due to GM plants operating during the traditional shutdowns in July. In the services sector, employment rose by 67 000 broadly the same pace as in the previous two months (70 000 in July and 60 000 in June). While in trade & transport, information and financial services employment fell, business services, education & health and leisure & hospitality added jobs in August. The temporary help index, which is an accurate forecaster for the future development of the overall payrolls, rose by 17 000 after a slight decline in July. The household survey however showed that the unemployment rate rose from 9.5% to 9.6 in August, which was in line with expectations. The civilian labour force rose from 153.560 million to 154.110 million, but also unemployment rose by 261 000 to a total number of 14.860 million. Both average (at 34.2) and aggregate (92.4) hours worked stayed unchanged in August and average hourly earnings rose more than expected (0.3% M/M), indicating that those who have a job are receiving a higher income. After the previous reports disappointed, this outcome which was somewhat better-thanexpected, easing fears of a double dip in the US economy when seen in connection with the unexpected improvement in the manufacturing ISM. In the coming months, it will be interesting to see whether labour market conditions improve further after a fall-back in the previous months.
Contrary to the improving manufacturing ISM, the non-manufacturing ISM surprised on the downside of expectations, falling even more than expected in August. The non-manufacturing ISM fell from 54.3 to 51.5, while a more moderate decline was expected. The details provide a similar picture with declines in business activity (54.4 from 57.4), new orders (52.4 from 56.7), backlog of orders (50.5 from 52.0), supplier deliveries (51.0 from 52.0), inventory change (53.5 from 55.5), employment (48.2 from 50.9) and new export orders (46.5 from 52.0). Imports (50.5 from 48.0) and inventory sentiment (60.0 from 59.0) improved slightly, while prices paid rose significantly (60.3 from 52.7). The US non-manufacturing index is now at its lowest level since the start of the year, which is in sharp contrast with the manufacturing ISM and indicates that the economic outlook is still uncertain. Nevertheless, we think the economy is in a soft patch and not sliding towards a double dip.
EMU: retail sales rise for the 3rd straight month
In July, euro zone retail sales rose by 0.1% M/M, slightly less than the expected 0.2% M/M increase, while the previous figure was upwardly revised from 0.0% M/M to 0.2% M/M. On a yearly basis, retail sales rose by 1.1% Y/Y, almost twice as much as expected. The details show that food, drink and tobacco rose by 0.3% M/M, while sales of non-food products fell slightly (by 0.1% M/M). Euro zone retail sales rose for a third consecutive month, which is an encouraging sign that consumers started to spend again and raises expectations that the euro zone recovery will continue in the second part of the year.
The final figure of August euro zone services PMI showed a slight upward revision compared to the first estimate. Services PMI was upwardly revised from 55.6 to 55.9, slightly above the July reading (55.8). National data show an upward revision in France (60.4 from 59.9) and an upward surprise in Italy, while German services PMI was downwardly adjusted from 58.5 to 57.2 and Spanish services PMI fell below 50.0. Nevertheless, the outcome confirms that euro zone services PMI is stabilising recently.
Other: also UK services PMI disappoints in August
After manufacturing and construction PMI, also services PMI surprised on the downside of expectations in the UK. Services PMI fell from 53.1 to 51.3, while only a marginal decline was expected. After a surprisingly positive second quarter, this outcome indicates that a slowdown might be expected for the second halve of the year.
