Welcome to your weekly macroeconomic round-up, where we spotlight a few of the most significant events in the last week.
Nonfarm payroll growth disappoints but unemployment rate continues to decline and average hourly earnings surge
Nonfarm payrolls grew by only 235k in August, well below the 733k consensus forecast. The negative impact of the Delta variant was apparent, with leisure and hospitality employment unchanged and retail jobs falling by 29k. Nevertheless, the overall unemployment rate fell 0.2pp to 5.2% and underemployment fell 0.4pp to 8.8%. Average hourly earnings increased 0.6% m-o-m and 4.3% y-o-y, with the largest monthly increases coming in the leisure and hospitality (+1.4%) and retail trade (+0.7%) sectors. Overall, the report should not have any material impact on Fed policy, with tapering of QE purchases still likely to commence later this year.
Delta variant containment measures hit Chinese PMIs
The Caixin (private sector) services PMI plunged to 46.7 in August from 54.9 in July, with the official sector service PMI dropping from 53.3 to 47.5. The Caixin manufacturing gauge fell from 50.3 to 49.2 and the official manufacturing PMI fell from 50.4 to 50.1. However, with the spread back under control, the business outlook remains relatively positive, with upcoming festivals and holidays expected to support services consumption. Targeted government support for sectors hardest hit by the COVID pandemic is also likely to be expanded.
Markets
Equities rose over the week, particularly in Asia. Bond yields were higher as weakness in the data was generally ascribed to temporary factors. FX markets displayed a “risk-on” dynamic, with haven currencies (USD, JPY, CHF) underperforming and bellwether EM currencies like the Mexican peso and South African rand registering the strongest gains.
Look out for next week’s update, where we’ll be focusing on the ECB policy meeting and European industrial production data.
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