WASHINGTON (Reuters) – The U.S. economy created the fewest jobs in seven months in August as hiring in the leisure and hospitality sector stalled amid a resurgence in COVID-19 infections, which weighed on demand at restaurants and hotels. But other details of the Labor Department’s closely watched employment report on Friday were fairly strong, with the unemployment rate falling to a 17-month low of 5.2% and July job growth revised sharply higher. Wages increased a solid 0.6% and fewer people were experiencing long spells of unemployment. This points to underlying strength in the economy even as growth appears to be slowing significantly in the third quarter because of the soaring infections, driven by the Delta variant of the coronavirus, and relentless shortages of raw materials, which are depressing automobile sales and restocking. “It is important to keep the right perspective,” said Brian Bethune, professor of practice at Boston College. “Given the supply chain constraints and the ongoing battle to lasso COVID-19 to the ground, the economy is performing exceptionally well.” The survey of establishments showed nonfarm payrolls increased by 235,000 jobs last month, the smallest gain since January. Data for July was revised up to show a whopping 1.053 million jobs created instead of the previously reported 943,000. Hiring in June was also stronger than initially estimated, leaving average monthly job growth over the past three months at a strong 750,000. Employment is 5.3 million jobs below its peak in February 2020. Economists polled by Reuters had forecast nonfarm payrolls increasing by 728,000 jobs in August. Though the Delta variant https://www.reuters.com/business/delta-causes-jump-us-workers-sidelined-recent-weeks-survey-shows-2021-09-03 was the biggest drag, fading fiscal stimulus was probably another factor. The response rate to the survey is lower in August and the pandemic has made it harder to adjust education employment for seasonal fluctuations. The initial August payrolls print has undershot expectations over the last several years, including in 2020. Payrolls have been subsequently revised higher in 11 of the last 12 years. The August payroll figures have historically been revised higher in the years since the Great Recession, sometimes significantly, and there’s a good chance this effect will occur again this time,” said David Berson, chief economist at Nationwide in Ohio. Employment in the leisure and hospitality sector was unchanged after gains averaging 377,000 per month over the prior three months. Restaurants and bars payrolls fell 42,000 and hiring at hotels and motels decreased 34,600, offsetting a 36,000 gain in arts, entertainment and recreation jobs. Retailers shed 29,000 jobs. Construction lost 3,000 jobs. There were gains in mining, financial services, information and professional and business services as well as transportation and warehousing.
COVID bounce back… It’s not over!
WH told to scale back vaccine booster plans – report
The Biden administration has hailed the need for COVID-19 vaccine booster shots as the Delta variant cripples some states’ health-care systems, but top government scientists are urging it to hit the breaks. Dr. Janet Woodcock, the acting head of the Food and Drug Administration, and Dr. Rochelle Walensky, the director of the Centers for Disease Control and Prevention, had a meeting with the White House’s COVID-19 coordinator Jeff Zients on Thursday, The New York Times reports. In it, the two told Zients they needed more time to collect and review the science behind booster shots, including whether they should only be given to those with the Pfizer vaccine and how many of those individuals should take it. As a result, they said, the White House should scale back its push on boosters, which it had hoped to offer later this month. The White House said it was waiting on full FDA approval before moving forward. “We always said we would follow the science, and this is all part of a process that is now underway,” spokesman Chris Meagher said. “When that approval and recommendation are made, we will be ready to implement the plan our nation’s top doctors developed so that we are staying ahead of this virus.”
US job creation slows sharply in August as Delta variant hits economy
WASHINGTON, Sept 3 (Reuters) – The U.S. economy created the fewest jobs in seven months in August as hiring in the leisure and hospitality sector stalled amid a resurgence in COVID-19 infections, which weighed on demand at restaurants and other food places. But other details of the Labor Department’s closely watched employment report on Friday were fairly strong, with the unemployment rate falling to a 17-month low of 5.2% and July job growth revised sharply higher. Wages increased a solid 0.6% and fewer people were experiencing long spells unemployment. This points to underlying strength in the economy even as growth appears to be slowing in the third quarter because of the soaring infections, driven by the Delta variant of the coronavirus, and relentless shortages of raw materials, which are depressing automobile sales and restocking. Nonfarm payrolls increased by 235,000 jobs last month, the smallest gain since January. Data for July was revised up to show a whopping 1.053 million jobs created instead of the previously reported 943,000. That left the level of employment about 5.3 million jobs below its peak in February 2020. Economists polled by Reuters had forecast nonfarm payrolls increasing by 728,000 jobs. The initial August payrolls print has undershot expectations and been slower than the three-month average job growth through July over the last several years, including in 2020. August payrolls have been subsequently revised higher in 11 of the last 12 years.
Employment in the leisure and hospitality sector was unchanged as restaurants and bars payrolls fell 42,000, offsetting a 36,000 gain in arts, entertainment and recreation jobs. Retailers shed 29,000 jobs.
There were gains in professional and business services, transportation and warehousing, as well as manufacturing, which added 37,000 jobs. Factory hiring remains constrained by input shortages, especially semiconductors, which have depressed motor vehicle production and sales. Raw material shortages have also made it harder for businesses to replenish inventories. Motor vehicle sales tumbled 10.7% in August, prompting economists at Goldman Sachs and JPMorgan to slash third-quarter GDP growth estimates to as low as a 3.5% annualized rate from as high as 8.25%. Government payrolls fell in August as state government education lost 21,000 jobs. The Bureau of Labor Statistics, which compiles the employment report cautioned that “recent employment changes are challenging to interpret, as pandemic-related staffing fluctuations in public and private education have distorted the normal seasonal hiring and layoff patterns.” Details of the smaller household survey from which the unemployment rate is derived were fairly upbeat. The unemployment rate fell to 5.2%, the lowest since March 2020 from 5.4% in July. It has, however, been understated by people misclassifying themselves as being “employed but absent from work.” Without this problem, the jobless rate would have been 5.5%. Though the participation rate was steady at 61.7%, about 190,000 people entered the labor force last month. Even more encouraging, the number of permanent job losers declined 443,000 to 2.5 million. The number of long-term unemployed dropped to 3.2 million from 3.4 million in the prior month. They accounted for 37.4% of the 8.4 million officially unemployed people, down from 39.3% in July. The duration of unemployment fell to 14.7 weeks from 15.2 weeks in July. The employment report will be parsed by investors trying to gauge the timing of the Federal Reserve’s announcement on when it will start scaling back its massive monthly bond buying program. Fed Chair Jerome Powell last week affirmed the ongoing economic recovery, but offered no signal on when the U.S. central bank plans to cut its asset purchases beyond saying it could be “this year.” Some economists do not believe the below-expectations payrolls count is weak enough for the Fed to back away from its “this year” signal. There were a record 10.1 million job openings at the end of June. Lack of affordable childcare, fears of contracting the coronavirus, generous unemployment benefits funded by the federal government as well as pandemic-related retirements and career changes have been blamed for the disconnect. There is cautious optimism that the labor pool will increase because of schools reopening and government-funded benefits expiring on Monday. But the Delta variant could delay the return to the labor force by some of the unemployed in the near term.
UK service sector growth slows amid staff shortages and supply chain disruption
Small caps have started to outperform the MSCI quality index as well as the S&P 500 and Nasdaq 100, two of the highest-quality large-cap indices in the world.
We think this may be the early signal that it’s time for high-quality names to finally take their hit on valuation, completing the mid-cycle transition.
Understanding why this might happen could help to put one into the right stocks for the rest of the year. We see two very different possible narratives ahead.
- On the one hand, while the Fed has not yet begun to taper its asset purchases, we think that the start is inevitable later this fall or in the winter. With record GDP and earnings growth, rising inflation and the rates of infection from the Delta variant peaking, the Fed will feel more pressure to remove what is essentially emergency monetary accommodation. We expect a more formal signal from the Fed at the September FOMC meeting, and the markets are likely to anticipate it. That means higher interest rates and lower equity valuations. Our rates strategists expect a move to 1.8% on 10-year Treasury yields by year-end. Assuming a stable equity risk premium at 345bp, P/Es would fall to 19x, or 10% lower. With the quality stocks now expensive relative to the market and arguably more crowded today, it may be their turn to experience the rolling correction that’s been ongoing all year. It also suggests that we get a rotation back towards cyclicals and reopening plays. We favor financials the most in this possible outcome.
- The other reason why we might finally see the S&P 500 experience its mid-cycle transition correction is that growth disappoints. With peak everything, a deceleration is looming, and the chances are increasing that it’s greater than expected, as forecasts have been extrapolated from an unrepeatable 1H consumption boom. In this outcome, we favor defensive quality sectors like healthcare and staples that have less valuation risk in the event rates move higher.
In short, this fall we still expect our mid-cycle transition to end with a 10%+ S&P 500 correction, but a narrative of either fire or ice will determine the leadership from here. As such, our recommendation is a barbell of defensive quality with financials to participate and protect in either outcome.
Booster COVID-19 shots vastly increase protection – study
A GROUNDBREAKING study has found a third booster shot of the Pfizer vaccine could help keep the Delta variant at bay, by giving seniors four times the protection against COVID-19.
According to Israeli researchers in Jerusalem, patients who have received a booster jab boasted four times greater protection against the coronavirus. Data from the Ministry of Health of Israel also appears to show the booster is five to six times more effective at protecting seniors from serious illness and hospitalisation than the regular two doses. The Pfizer vaccine was recently approved by the US Food and Drugs Administration (FDA) and the Israeli government has already approved the rollout of booster shots in July this year for people over the age of 60. Israeli researchers believe booster shots of Pfizer can tackle the Delta variant. The Pfizer vaccine is administered in two doses More recently, the booster programme was extended to people above the age of 30. According to the WHO, Israel has reported more than one million Covid infections since the pandemic began, as well as more than 6,800 deaths. As of August 21, more than 12.7 million vaccines have been administered across the country. About 80 percent of Israel’s population has already received two doses of the vaccine, and about 1.4 million people have had a booster. To put the numbers into perspective, Israel has a fairly small population of about 9.05 million. Naftali Bennett, Prime Minister of Israel, said on Sunday: “Israel has a major advantage today because we are world pioneers in using the third vaccination, and we have a better understanding about the rate at which the previous vaccinations are waning, and what we need to do, when we need to do it, and even for what ages. “My advice to every world leader today is to start the third vaccination straight away, don’t wait. “Give it five months from the second vaccination, otherwise you will have false illusions about protection.” Evidence has emerged to show Covid vaccines, although effective, offer weakened protection in time, which makes the case for a booster shot after the initial two. According to Doron Gazit, a member of the Hebrew University’s COVID-19, handing out boosters to Israelis over the age of 60 has proven to slow the rate of infection in the last 10 days. He told Reuters: “We attribute this to the booster shots and more cautious behaviour. It is estimated more than half of people over the age of 60 have already received the third jab. Some are, however, uncertain whether widespread booster jabs can truly eliminate the threat posed by Delta. Dvir Aran, a biomedical data scientist at Israel’s Institute of Technology, said: “It will take a long time until enough people get a third dose and until then thousands more people will getting serous ill.”
‘No urgent need’ for boosters in EU… US over 100,000 COVID-19 hospitalizations most since February
Sept 1 (Reuters) – The European Centre for Disease Prevention and Control (ECDC) said on Wednesday there was no urgent need for booster doses of COVID-19 vaccines for the fully vaccinated, citing data on the effectiveness of shots.
The comments follow a similar statement from the European Medicines Agency last month that more data was needed on the duration of protection after full inoculation to recommend using booster shots.
The evidence on real-world effectiveness shows that all vaccines authorized in the region are highly protective against COVID-19-related hospitalisation, severe disease and death, the ECDC said. But the agency said extra doses can be considered for people who experience a limited response to the standard regimen, adding that these shots should be treated differently from booster doses.
Germany and France have announced they would begin giving boosters to vulnerable people and the immunocompromised from this month to protect citizens from the more infectious Delta variant.
The U.S. government has also started administering a third dose of Pfizer Inc (PFE.N)-BioNTech and Moderna Inc’s (MRNA.O) vaccines to those with compromised immunity. It plans to offer booster doses more widely from Sept. 20 if the country’s health regulators deem them necessary. read more
US over 100,000 COVID-19 hospitalizations most since February
U.S. businesses created lackluster 374,000 jobs
To be sure, delta has spurred companies to exercise more caution, especially restaurants and other businesses that deal face to face to customers. And it’s caused some consumers to avoid large crowds again.
That probably helps explains the somewhat slow in hiring in August, a notoriously fickle month to assess because so many people go on vacation..Yet by and large, the economy has held up well and it’s still growing at a fairly strong pace.
Factories hit by pandemic-related supply disruptions
LONDON/TOKYO (Reuters) – Global factory activity lost momentum in August as the ongoing coronavirus pandemic-disrupted supply chains, raising concerns faltering manufacturing would add to economic woes caused by slumping consumption, surveys showed on Wednesday. Many firms reported logistical troubles, product shortages and a labour crunch which have made it a sellers’ market of the goods factories need, driving up prices. While factory activity remained strong in the euro zone, IHS Markit’s final manufacturing Purchasing Managers’ Index (PMI) fell to 61.4 in August from July’s 62.8, below an initial 61.5 “flash” estimate. “Despite the strong PMI figures, we think that lingering supply-side issues and related producer price pressures might take longer to resolve than previously expected, increasing the downside risk to our forecast,” said Mateusz Urban at Oxford Economics. In Britain, where factories also faced disruptions, manufacturing output grew in August at the weakest rate for six months. The United States likely suffered a similar slowdown, data is expected to show later on Wednesday. [GB/PMIM] Canada’s economy unexpectedly shrank last quarter and in July, official data showed on Tuesday – hurt by decreases in manufacturing, construction and retail trade – and Australia reported slower growth in the second quarter on Wednesday.Meanwhile, Southeast Asia – a low-cost manufacturing hub for many global companies – was hit particularly hard with factory activity shrinking in Vietnam, Indonesia and Malaysia because of virus outbreaks and output suspensions. And in a worrying sign for the global economy, China’s factory activity slipped into contraction in August for the first time in nearly 1-1/2 years as COVID-19 curbs, supply bottlenecks and high raw material prices weighed on output. China’s Caixin/Markit Manufacturing PMI fell to 49.2 in August, from 50.3 in July, breaching the 50-mark separating growth from contraction. The result was well below market expectations, underscoring the fragile nature of China’s recovery that had helped the global economy emerge from pandemic-induced doldrums. The private survey followed an official PMI on Tuesday, which showed the index falling in August but staying above the 50 mark.
“The elephant in the room for the long North Asia, short ASEAN view is China. This morning, the Caixin Manufacturing PMI followed yesterday’s official number South, falling under 50,” said Jeffrey Halley at OANDA.
“That rounds out a grim week for China’s PMIs as COVID-19 lockdowns and the same supply chain challenges the rest of the world is experiencing erode economic performance.” Export power-houses Japan, South Korea and Taiwan also saw manufacturing activity expand at a slower pace in August, a sign chip shortages and factory shutdowns in the region could delay a sustained recovery from the pandemic-induced slump. The surveys highlight the pandemic’s broadening damage in Southeast Asia, where soaring infections and subsequent lockdown measures have hurt both the service and manufacturing sectors.
Delta variant outbreaks in the region have caused supply chain headaches for the world’s largest manufacturers, many of which rely on auto parts and semiconductors made in low-cost bases such as Thailand, Vietnam and Malaysia.
“If the strict lockdown measures continue, Southeast Asia may find it hard to remain a global production hub,” said Makoto Saito, an economist at NLI Research Institute. Japan’s PMI eased and new export orders posted their first contraction since January. South Korea’s index fell to 51.2. In Vietnam and Malaysia, activity was hurt by lockdown measures and rising infections that forced some factories to suspend operations. Vietnam saw factory activity shrink while Malaysia’s PMI stood at 43.4 in August. Once seen as a driver of global growth, Asia’s emerging economies are lagging advanced economies in recovering from the pandemic’s pain as delays in vaccine rollouts and a spike in Delta variant cases hurt consumption and factory production. Growth in India’s factory sector activity slowed as persistent pandemic-related weakness weighed on demand and output, forcing firms to cut jobs again following a brief recovery in July.
German retail sales slump signals weak start to third quarter
BERLIN, Sept 1 (Reuters) – German retail sales fell by far more than expected in July after two months of sharp increases, data showed on Wednesday, in a first sign that a consumer-driven recovery in Europe’s largest economy might be losing steam in the third quarter. The Federal Statistics Office said retail sales dropped 5.1% on the month in real terms after a revised jump of 4.5% in June and an increase of 4.6% in May. The July reading missed a Reuters forecast for a fall of 0.9%. The monthly comparison was distorted heavily by the lifting of COVID-19 restrictions on shopping in most parts of the country in June, the statistics office said. Retail sales – a volatile indicator often subject to revisions – edged down by 0.3% in real terms year on year, it added. Compared with February 2020, the month before the coronavirus crisis hit Germany, retail sales were up 3.8%. T he German economy returned to growth in the second quarter but bounced back less strongly than other euro zone countries as supply chain bottlenecks slowed industrial output. Supply problems with raw materials and intermediate goods, coupled with rising COVID-19 cases because of the more contagious Delta variant, are driving companies to take a dimmer view of the coming months. Bankhaus Lampe analyst Alexander Krueger believes that retail sales are likely to recover in the comings months, with the labour market strong and more companies scaling back short-time work schemes introduced during the pandemic. However, overall support for the economy from household spending could be less strong in the third quarter than many had hoped for, he added.