Succinct summation of week’s events.
Positives:
1) NFP July of 255k, well above the estimate of 180k. Private sector added 217k; 3 month average of private sector job growth is 158k vs 169k over the past 6 months.
2) Household survey saw a nice bounce of 420k jobs after seeing just 67k in June. The workweek improved by one tenth to the most since January and wages were up by .3% m/o/m and 2.6% y/o/y. That y/o/y gain matches the most since ’09 but average weekly earnings still remains modest at 2.3%.
3) Government hiring has grown by 71k over the past two months vs the average of about 10k per month over the prior 12 months.
4) Vehicle sales in July rose by 17.77mm SAAR, above the estimate of 17.3mm but only thanks to a ramp up in incentives and fleet sales.
5) Headline PCE inflation deflator rose .9% y/o/y, unchanged with May while the core rate grew by 1.6% y/o/y (in line). Gap between core PCE and the 2.3% core CPI print is huge.
Negatives:
1) Labor force participation rate rose one tenth to a still anemic 62.8% as did the employment ratio to 59.7% and the U6 all in rate rose one tenth to 9.7%.
2) Due to the change in money market reg’s, 3 month LIBOR rose another 3 bps on the week, is higher by 16 bps over the past 6 weeks and is up by 47 bps over the past year, almost twice as much as the Fed rate hike.
3) Mortgage applications to buy a home fell 2.4% w/o/w and are down for three straight weeks and the y/o/y rise slowed to 6%. The housing recovery continues but still in a choppy fashion. The index is at the lowest level since February. Refi applications fell 4.2% w/o/w, down for a 3rd week but are still higher by 56% y/o/y.
4) Initial jobless claims rose 3k w/o/w to 269k which was 4k above the estimate. As a 254k print dropped out of the 4 week average, the new 4 week average rose to 260k from 257k. Continuing claims, delayed by a week, fell 6k after rising by 12k last week.
5) July ISM services index fell 1 pt to 55.5 which was a touch below the estimate of 55.9 but is still above the average year to date of 54.6. This compares with the 2015 average of 57.2. Similar to June, 15 industries saw growth of the 18 surveyed.
6) US trade deficit widened to $44.5b in June, $1.5b more than expected and up from $41b in May
7) June spending rose .4% m/o/m, one tenth more than expected while income grew by .2%, one tenth less than expected. This led to a two tenths drop in the savings rate to 5.3% which is the lowest since October. Spending would have went into the positive column if it was driven by faster income growth instead of a lower savings rate.
