US job-loss lifelines run out

Kia ora,

Welcome to Friday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news job-loss benefit lifelines are running out fast in the US.

Markets have eyes on tomorrow's non-farm payrolls report and expect new jobs to recover about +850,000 of the earlier losses, less than in prior months.

But today, job retrenchment data was released for September and they were higher than for August, and +160% higher than this time last year. And a new round of major job cuts and furloughs is just starting.

New US jobless claims came in at +837,000. Although this was a fraction less than expected, the August levels were revised higher. There are now 11.8 mln people on these claims, falling faster than expected now (down almost -1 mln in a week) as qualifications expire at a much more rapid pace. The social cost of expiring support is really biting now.

And that is being revealed in the US personal income data. It's a month behind (today's data is for August) but that fell a very sharp -2.7% from July. That involves a spending decline of -NZ$800 bln - in just one month. Year-on-year it is down more than -NZ$2.2 tln. That is big-time annual hurt for even an economy as big as the US, a stunning -11% of their GDP.

However, it is not all bad news there. Their factories are expanding, even if at a reduced pace. There were two PMI measures for September out overnight. The widely-watched local one recorded a slower expansion even if the employment sub-index is still contracting. The internationally-benchmarked one is less upbeat but does show factory employment growing.

In Canada they are seeing insurers hike premiums and reduce coverage for the hospitality industry, a trend that may show up here and one that will hurt a very fragile sector.

In Japan, September PMI data indicated that the Japanese manufacturing sector moved another step closer to stabilisation, helped by the slowest fall in new orders since January.

In South Korea, their exports rose much more than expected in September, up +7.7% year-on-year when a +2% rise was expected. Their imports were up +1.1% when a substantial decline was expected. South Korea's exporting machine seems to be reviving quite quickly.

Remember, China is in its second day of a week-long Golden Week holiday, so economic news is sparse. But their domestic travel activity is huge.

In Hong Kong, there is a very heavy police clampdown on the city for China's CCP national day events as protesters rally.

The EU jobless rate ticked up to 8.1% in August data out overnight. Their long-run improvement from the awful levels reached in 2014 is well and truly over.

In Australia, factory PMIs for September have been released too. The internationally benchmarked one shows their recovery gathered pace at the end of the third quarter, with the sector recording solid increases in both production and sales. Even jobs rose. The local AIGroup one however was no-where near as positive, signaling a contraction driven by the Victorian contraction. One of them is wrong, but we don't know which yet. Your choice, but with no mention of Victoria in the CBA one, that upbeat version seems less likely.

And staying in Australia, there are expectations that a Trans Tasman travel bubble will be announced "within days". It is said to be state-specific.

Wall Street has started today up another +0.7% in midday trade on stimulus hopes. But they are still elusive. European markets were mixed although most showed small gains. Shanghai is closed for its week's long holiday, Hong Kong is closed for just two days. Tokyo didn't trade yesterday either but that was due to a computer glitch. It is the first time ever they have had to skip a day. The ASX200 closed higher, up +1.0% and making back half of the prior day's drop, while the NZX50 Capital Index rose +0.6%.

The latest global compilation of COVID-19 data is here. The global tally is 34,080,000 and up +337,000 in one day. Global deaths reported now exceed 1,016,000 but clearly many are going unreported.

The largest number of reported cases globally are still in the US, which is up +42,000 overnight to 7,463,000. Their death total is just over 212,000 and still rising at +1000 per day. 

In Australia, there have now been 27,096 COVID-19 cases reported, and that is only +18 more cases than yesterday. Deaths are up to 888 (+2). Their recovery rate is still at 91%.

The UST 10yr yield is relatively weaker today, dipping -2 bps to 0.67% but holding most of yesterday's rise. 

The price of gold is much higher this morning at US$1909/oz and a +$US14 rise. Silver has risen proportionately more.

Oil prices are weaker today, down by nearly -US$2 to just over US$38/bbl in the US, while the international price is not much changed at just over US$40.50/bbl.

The Kiwi dollar starts today higher yet again, now back up to at 66.5 USc and capping a +1c rise over the past week as commodity currencies have generally risen. Against the Australian dollar we have hardly moved and are now at 92.5 AUc. Against the euro we firmer at 56.6 euro cents. And that means our TWI-5 has risen to 69.8.

The bitcoin price is a lot lower this morning, now at US$10,486 and a -2.7% retreat and its lowest in 18 days.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. We will do this again, on Monday.