Daily Brief

Jobs confusion

Investors who had spent the week looking forward to the US employment data (USD) were left scratching their heads when the numbers came out. For the archetypical two-handed economist the figures were a dream: on one hand the increase in nonfarm payrolls was 210k, less than half the expected number; on the other hand 1.1m people joined the workforce. 

The two figures came from exactly the same report. The Bureau of Labor Statistics (USD) said that nonfarm payrolls went up by 210k in November, or by 292k including revisions to earlier months. Against the forecast 550k increase, and in comparison with the last six months, the number looked rubbish. However, the number of employed people went up quite dramatically and unemployment went down from 4.6% to 4.2%.

The confusion – and there was indeed confusion – arose because the data came from two different surveys.  They always do, but on this occasion the disparities were more glaring than usual. Investors’ first reaction was to sell the dollar, then they knocked it back and forth across a half-cent range against the euro before eventually agreeing that there was nothing there to dissuade the Federal Reserve from tightening monetary policy. The USD is an average of 0.4% firmer, and up by two thirds of a cent against the GBP.

No jobs confusion

The Canadian (CAD) employment data were much easier to comprehend. They were better than expected. They were not, however, good enough to add any lasting value to the CAD, which is unchanged against the USD.

Employment in Canada (CAD) increased by a net 154k in November, taking the rate of unemployment down from 6.7% to 6%, a 21-month low. The CAD initially strengthened by three quarters of a cent against the USD before giving it all back in fairly short order. Although the Bank of Canada will have the opportunity to raise its 0.25% benchmark interest rate on Wednesday, analysts expect no move until next year.

As well as North American employment, the other data in evidence on Friday were the services sector purchasing managers’ indices. Broadly, the US measures were better than expected; the European readings not so much. For the Eurozone as a whole (EUR) the index was half a point higher on the month and half a point below forecast at 55.9. The individual national figure ranged between Germany’s 52.2, a two-month high, and Ireland’s seven-month low at 59.3. Britain’s 58.5 (GBP) was much as expected.

Bank of England outlook

The one to watch today is Ben Broadbent, Deputy Governor of the Bank of England (GBP). He will be speaking this morning about the “Outlook for growth, inflation and monetary policy”. Sterling will be hanging on his every word.

The rest of the agenda is all a bit ordinary.  German factory orders (EUR) plunged 6.9% in October. The slump occurred because supply chain delays are discouraging potential buyers, who see no point in ordering stuff that will take for ever to arrive. The other European data this morning relate to Italian retail sales and Eurozone investor confidence (EUR).

There is nothing of any worth from North America this afternoon but the pace picks up tonight, starting with AiG’s performance of services index (AUD), Australian house prices (AUD) and the BRC’s measure of UK retail sales (GBP). China’s trade figures (CNY) follow, and then the Reserve Bank of Australia (AUD) announces its monetary policy decision. No change is expected.