Dentalfloss
Legendary member
- Messages
- 63,404
- Likes
- 3,726
EVENTS PREVIEW **
********************
The question for today in the absence of any major scheduled policy events, is whether a busy run of statistics culminating in the leviathan that is the monthly US labour report can distract from the array of uncertainties and risks in Europe, be that Brexit related, European banks, or the European Commission's decision to institute an excessive deficit procedure against Spain and Portugal, which can only be classified as as dumping nitro-glycerine on a raging bush fire. On the data schedule, there are Japanese Wages and Economy Watchers survey (both very poor and much weaker than expected), German Trade (Exports missing forecasts sharply -1.8% m/ vs. expected +0.4%) and French Industrial Production (Manufacturing slightly better than forecast) to digest ahead of UK Q1 Labour Costs and Trade, Brazilian IPCA inflation and the Canadian monthly jobs report. It can be safely observed that a Hirschmann style analysis is highly appropriate at the current juncture. To recap, Hirschman’s ‘Hiding Hand’ argues that creativity is the key problem solving tool when we face unexpected situations; and that it is only via the experience of impotence when faced with the unexpected that we develop the innovative knowledge to solve problems, and that ‘rational choice’ often stifles innovation and creativity. Hirschman also outlined the concept of “possibilism”, which is an approach to escaping ‘straitjacketing concepts’ such as perceived “absolute obstacles, imaginary dilemmas and one-way sequences”, noting that such “obstacles” can often turn out to be an asset or, at the very least, a spur for change. Hirschman also argued that such “inverted sequences” should not be seen as having primacy over ‘orderly sequences’, but rather as a means to ‘increase the number of ways in which the occurrence of change can be visualized’.
** U.S.A. - June Payrolls, Unemployment, Wages **
- The evidence on the US labour market that has accumulated since last month's 'shock' 38K Payrolls gain (accompanied by downward revisions to prior readings) has been overwhelmingly that May's report was an 'outlier' (in part due to the Verizon strike). Weekly Jobless Claims have been low falling back to the 43-yr low in yesterday's report, the less timely April JOLTs report matched its cyclical high at 5.788 Mln, and the ISM employment sub-indices have also indicated a solid pace of labour demand, as did yesterday's ADP at +172K. June Payrolls are seen rebounding to 175K, with a 267K Initial Claims in payrolls survey week offering supporting evidence. As ever it needs to be remembered that the FOMC sees the 'breakeven rate' for Payrolls as somewhere in the 80-100K area. The implied 3-month average for Payrolls, in the (unlikely) event that the consensus forecast is correct would be 113K. The extent of any revisions will be critical, and in balance of risk terms, markets would not be prepared for an upward revision to May to say 80-100K. The Unemployment Rate will as ever require attention, with last month's slide to 4.7% from 5.0% predicated on an encouraging 484K fall in Unemployment, a meagre 26K rise in Employment, but marred by a 458K contraction in the workforce, which in turn saw the Participation Rate slip to 62.6% from 62.8%. Average Hourly Earnings in May posted a solid 0.2% m/m 2.5% y/y rise, but this was largely dismissed as being immaterial in the context of Payrolls, but should the latter prove to be not too far from consensus in June, and if the usual 0.2% m/m forecast proves correct, then the y/y pace will pick up to 2.7% y/y. Eminently 'the ZIRP and NIRP forever' protagonists will argue that a solid, if unspectacular labour report is historical, and a lagging indicator, and that mounting uncertainties (not least the US's November elections) will weigh on labour demand going forward. However that is the consensus view, and the risk is more that the Fed's flip-flopping on policy may leave it vulnerable to falling way behind the curve, if US H2 growth and inflation measures prove to be rather more resilient.
from Marc Ostwald
********************
The question for today in the absence of any major scheduled policy events, is whether a busy run of statistics culminating in the leviathan that is the monthly US labour report can distract from the array of uncertainties and risks in Europe, be that Brexit related, European banks, or the European Commission's decision to institute an excessive deficit procedure against Spain and Portugal, which can only be classified as as dumping nitro-glycerine on a raging bush fire. On the data schedule, there are Japanese Wages and Economy Watchers survey (both very poor and much weaker than expected), German Trade (Exports missing forecasts sharply -1.8% m/ vs. expected +0.4%) and French Industrial Production (Manufacturing slightly better than forecast) to digest ahead of UK Q1 Labour Costs and Trade, Brazilian IPCA inflation and the Canadian monthly jobs report. It can be safely observed that a Hirschmann style analysis is highly appropriate at the current juncture. To recap, Hirschman’s ‘Hiding Hand’ argues that creativity is the key problem solving tool when we face unexpected situations; and that it is only via the experience of impotence when faced with the unexpected that we develop the innovative knowledge to solve problems, and that ‘rational choice’ often stifles innovation and creativity. Hirschman also outlined the concept of “possibilism”, which is an approach to escaping ‘straitjacketing concepts’ such as perceived “absolute obstacles, imaginary dilemmas and one-way sequences”, noting that such “obstacles” can often turn out to be an asset or, at the very least, a spur for change. Hirschman also argued that such “inverted sequences” should not be seen as having primacy over ‘orderly sequences’, but rather as a means to ‘increase the number of ways in which the occurrence of change can be visualized’.
** U.S.A. - June Payrolls, Unemployment, Wages **
- The evidence on the US labour market that has accumulated since last month's 'shock' 38K Payrolls gain (accompanied by downward revisions to prior readings) has been overwhelmingly that May's report was an 'outlier' (in part due to the Verizon strike). Weekly Jobless Claims have been low falling back to the 43-yr low in yesterday's report, the less timely April JOLTs report matched its cyclical high at 5.788 Mln, and the ISM employment sub-indices have also indicated a solid pace of labour demand, as did yesterday's ADP at +172K. June Payrolls are seen rebounding to 175K, with a 267K Initial Claims in payrolls survey week offering supporting evidence. As ever it needs to be remembered that the FOMC sees the 'breakeven rate' for Payrolls as somewhere in the 80-100K area. The implied 3-month average for Payrolls, in the (unlikely) event that the consensus forecast is correct would be 113K. The extent of any revisions will be critical, and in balance of risk terms, markets would not be prepared for an upward revision to May to say 80-100K. The Unemployment Rate will as ever require attention, with last month's slide to 4.7% from 5.0% predicated on an encouraging 484K fall in Unemployment, a meagre 26K rise in Employment, but marred by a 458K contraction in the workforce, which in turn saw the Participation Rate slip to 62.6% from 62.8%. Average Hourly Earnings in May posted a solid 0.2% m/m 2.5% y/y rise, but this was largely dismissed as being immaterial in the context of Payrolls, but should the latter prove to be not too far from consensus in June, and if the usual 0.2% m/m forecast proves correct, then the y/y pace will pick up to 2.7% y/y. Eminently 'the ZIRP and NIRP forever' protagonists will argue that a solid, if unspectacular labour report is historical, and a lagging indicator, and that mounting uncertainties (not least the US's November elections) will weigh on labour demand going forward. However that is the consensus view, and the risk is more that the Fed's flip-flopping on policy may leave it vulnerable to falling way behind the curve, if US H2 growth and inflation measures prove to be rather more resilient.
from Marc Ostwald
