U.S.: Mixed Data from August

Dan North
Dan North Chief Economist North America

The economy added only +130k jobs in August vs. expectations of +160k, and the prior two months were revised down -20k. But government employment rose by the hiring of +25k temporary Census workers, and, as a result, private payrolls gained only +96k, well below the +177k average over the past 12 months. Retail lost -11k jobs and manufacturing gained only +3k jobs. But there was also strength in the report: the unemployment rate remained unchanged at 3.7%; the participation rate rose +0.2pp to 63.2%, tying February for the highest of the expansion period; the labor force rose by a strong +571k; and wages beat expectations, gaining +0.4% m/m. The weakness in manufacturing was also reflected in the ISM manufacturing survey, which slipped below the 50 level into contraction area at 49.1, the lowest level in almost four years. Seven of the ten components fell, and nine are now below 50 for the first time since the recession. But on the positive side, the ISM non-manufacturing survey rebounded by +2.7 points to 56.4, with nine of the ten components above 50.


Figure of the week: +1.4% Q2 2019 y/y GDP growth in Australia. 

Mexico: Draft budget is a perilous balancing act

We draw two lessons from the draft 2020 budget presentation by the government. First, it sticks to fiscal discipline on paper, as it aims at a primary fiscal surplus of +0.7% of GDP, after a target of +1% this year. Second, it illustrates the difficult equilibrium many emerging countries struggle to maintain: the urge to resort to fiscal stimulus as global growth is cooling (and particularly the U.S., Mexico’s main trade partner) without the necessary fiscal space and under market scrutiny. And more in this week's WERO.

Central and Eastern Europe: Accommodating monetary policy

Ukraine’s Central Bank lowered its key policy interest rate by 50bp to 16.5% last week as it expects continued disinflation. Headline inflation eased to 8.8% y/y in August. Combined with a stabilized currency (the UAH has gained +11% YTD vs. the USD), this allows for one or two more rate cuts in 2019. And more in this week's WERO.