Daily update
Daily update
- The US employment report for July is due. Like Orwellian newspeak, this can often mean the reverse of what it says it means. The household and establishment surveys portray contrasting pictures of employment (and both have shocking response rates). Immigration, self-employment, automation, and switching to higher quality jobs all play a role in messing with the data.
- The broad picture is of a cooling US labor market, without any reason for fear of unemployment to increase. Hiring seems to be slowing but firing is not a widespread concern. A neutral labor market merits rate cuts—because rate cuts are not an economic stimulus if they are primarily matching the decline in inflation (and keeping real interest rates neutral). This is one reason the Federal Reserve is now late in lowering rates.
- The Bank of England did lower rates, and as expected it was a five-to-four decision. Given how far UK inflation has fallen, this was not necessarily a surprise, and the economics justifies a steady rhythm of rate reductions—we look for a quarter point a quarter.
- US factory orders are not likely to excite too much attention, but alongside French and Italian industrial production, offer some supply side hints for the goods sector.
