Global Daily – Hurricane hits jobs growth

by: Nick Kounis

US Macro: ADP shows Hurricane-related slowdown in job growth – The ADP employment report showed a sharp slowdown in job growth in August. Private sector employment rose by 135K in September, down from a 228K gain in August and 198K in July. ADP attributed the slowdown to a dip in small business hiring. This was due to Hurricanes Harvey and Irma ‘which significantly impacted smaller retailers’. The slowdown in job growth last month will like also be picked up in the official labour market numbers on Friday, though it must be also noted that the ADP is not always a reliable guide. We expect overall non-farm payrolls to have risen by 100K last month, down from 156K in August. The consensus is for an 80K gain. Looking through the weather impact, we think that the underlying trend for job growth and indeed the overall economy remains robust and we are likely to see a rebound this month. Perhaps a more important aspect of the labour market report is developments in wages. We expect hourly early earnings growth to remain subdued, indeed the annual rate could well slip below 2.5%. Given the very weak trends in core inflation and ongoing lacklustre wage growth, it will be interesting to see whether FOMC officials start to become a little less certain that inflation will reach the target over the medium term. Up until now, they still seem to be confident of this. (Nick Kounis)

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Euro Macro: Signs of weaker consumer spending in Q2 – Eurozone retail sales fell by 0.5% mom in August, which was below consensus forecasts for a +0.3% gain. Retail sales can be a volatile indicator, but the signs of some softening of consumer spending growth in Q2 are building. The drop in retail sales in August followed a 0.3% fall in July, meaning that the pace of growth in the 3-months to August slowed to +0.4% compared to 1% in Q2. In addition, new passenger car registrations suggest that car sales may have actually contracted last quarter. This suggests consumer spending may have slowed from the 0.5% qoq gain seen in Q2. Nevertheless, with the labour market continuing to improve, we expect consumer spending to grow robustly going forward. Together with strength in the global economy and investment spending, eurozone GDP growth should remain comfortably above its trend rate. (Nick Kounis)