Nonfarm Payrolls Swell

Daily Analysis - 11/01/2016

US Job Creation Continues to Strengthen in Sign of More Sustainable Recovery

Employment showed another strong improvement in the United States for the month of December after the latest report from the Bureau of Labor Statistics showed the economy added more jobs than forecast. Companies added a staggering 292,000 employees during the month, adding to optimism and raising hopes for a second rate hike from the Federal Reserve.

German Industrial Production Shrinks

After posting notable gains in large part due to a weaker Euro, Germany’s industrial production slipped for the month of November, contracting at a -0.30% pace, printing well below the previous months’ figure and market expectations of 0.50%. Despite data showing factory orders rising by 1.50% during November, the drop was attributed to slowing emerging markets, causing headaches in planning future production. Factory producers fear that further declines are forthcoming especially considering the recent declines in China and weak outlook for global trade. Energy and production jumped in November with values at 2.50% and 1.60% respectively. The jump though was countered however by 3.30% decline in capital goods while manufacturing output dropped -0.80%. The DAX 30 has struggled to rally after the weekly reopening following stark losses in the prior week.

Swiss Deflation Eases Slightly

The annualized Swiss consumer price index showed slight improvement in December, with the value improving to -1.30% in comparison to last month’s annualized -1.40% pace, although missed expectations of -1.20%. Major contributors to the prolonged decline were transport prices, communication, recreation, and culture whereas the small improvement was attributed to increasing costs for clothing, footwear and education. On a monthly basis, the Swiss Federal Statistical Office reported deflation deepening further to -0.40% from November’s -0.10%, marking the biggest fall since July. Despite the Swiss National Bank having slashed rates well into negative territory, keeping them unchanged for a little over a year, deflation has persisted. The one benefit was the prevention of safe-haven flows with the Swiss Franc has little changed after the announcement with the USDCHF continuing to trend higher.

US Jobs Growth Skyrockets

Higher than anticipated job creation marked the end of 2015 according to the latest report from the US Bureau of Labor Statistics. Payrolls for December surged by 292,000, exceeding both November’s upward revised 252,000 jobs added and the consensus estimate of 200,000. Furthermore, the report highlighted that job openings were mostly on professional and business services, construction, health care, and food and drinking services whereas mining sector employment continued to decline. The unemployment rate remained steady at 5.00%, the lowest level since 2008. The US jobs market has proven robust despite concerns about emerging markets including China impacting the global economic outlook as commodity prices slide and financial markets tremble. The US Federal Reserve’s decision to lift interest rates in December was mostly based on the expectations that further tightening in the labor market will start to deliver higher wages and inflation.

UK Trade Deficit Improves Slightly

Friday saw the Office for National Statistics report the most recent trade data for the United Kingdom amid rising concerns about the regional outlook. November’s data indicated the deficit narrowing to -£10.64 billion from last month’s upward revised -£11.20 billion, missing the forecast of -£10.50 billion. Anxiety remains on the rise thanks to troubling global economic conditions, namely from China, as commodity prices continue to drop and the Federal Reserve’s rate hike promises weigh on growth prospects. Further exacerbating the deficit is the most recent losses in Sterling, making imports more expensive. Despite exports becoming more competitive thanks to the recent depreciation, total exports fell by -1.20% with shipments to EU countries declining by 1.50% whereas non-EU shipments contracted by 1.10%. In spite of recent mixed economic data, Finance Minister George Osborne warned citizens to expect borrowing costs to rise, contrasting with Bank of England Officials expectations of conditions remaining accommodative.