Friday's News Recap: U.S. Payrolls Fall Below Forecasts; ISM Mfg Treads Water

News Recap | Written by CEP News | Aug 01 08 21:35 GMT |

(CEP News) - The day ended with little additional economic news following the morning's two small upside surprises. A less dismal than expected U.S. nonfarm employment report and an ISM manufacturing survey showing the sector treading water were the main events of the day. In Canada, bankruptcies moved lower, and in Europe, the UK's manufacturing index and German retail sales both declined further than expected. U.S. nonfarm payrolls declined for the seventh straight month, falling less than expectations by a total of 51k jobs in July, according to the Bureau of Labor Statistics. Declines in the two previous months were upwardly revised by 26k, putting the three-month average of losses at -50k per month. In addition, the unemployment rate ticked up two-tenths to a four-year high at 5.7% (5.682%) despite expectations for an increase to only 5.6%. Average hourly earnings rose 0.3% from June for a total gain of 3.4% since July 2007. The average weekly earnings came in flat on the month but rose 2.8% year-over-year. According to the Commissioner of the Bureau of Labor Statistics Keith Hall, the 34k decline in the services sector jobs were mostly attributed to a fall in temporary jobs. He added that health care employment was one of the few sectors that showed strength rising by 33k over the month. Hall also noted that there was a notable increase in youth unemployment in July as millions of summer students struggled to find a place in the job market. In an interview with Bloomberg Television, former St. Louis Fed Chief William Poole called the news a "marginal surprise," adding that weakness in the labour market could keep the Fed on hold for some time. He also warned that the U.S. was "gradually building in a longer-run inflation problem that could come to haunt us next year." Following the BLS report, the Institute for Supply Management reported that their manufacturing index came in flat in July, after one month of modest growth and four months of declines. The survey's 50.0 reading beat the consensus forecast of 49.0. The components told a different story than the headline, however, as new orders fell to a seven-year low of 45.0, down from the prior month's 49.6 and marking the eighth straight month of slowdown. In contrast to the morning's nonfarm payrolls report, the ISM employment component expanded at 51.9 in the survey, following seven months of slowdown. Prices moderated from the previous month's 29-year high, moving down to a still-elevated 88.6 from 91.5. Simultaneous with the ISM's report, the U.S. Department of Commerce reported that construction spending in the U.S. fell 0.4% month-over-month in June while the previous month's 0.4% decline was revised to a flat reading. Residential construction declined by 1.7%, down slightly from May's 1.1% decrease, while non-residential construction gained 0.4% after rising 0.7% in the previous month. It was a bad day for auto manufacturers, as General Motors turned a few heads with its third largest loss in the history of the company. The firm reported a second-quarter adjusted loss per share of $11.21 compared to the street's forecast for a $2.40 loss per share. The second-quarter net loss was $15.5 billion, compared to a profit of $784 million in the same quarter one year ago. Later, year-over-year auto sales figures for March were released. Chrysler fell 29%; GM sales 26%; Toyoto 12%; Ford 15% and Honda 1.6%. "We expect the second half of 2008 will be more challenging that the first half as economic and credit conditions weaken," Ford's marketing chief Jim Farley said in a statement. But even as U.S. auto sales slumped in July, Canadian sales of vehicles surged 5% compared to the same month last year and are up 2.7% year to date, according to DesRosiers Automotive Consultants Inc. "Look up the definition of defying gravity and you will see three words ... 'CANADIAN VEHICLE SALES'," wrote auto industry expert Dennis DesRosiers, who said the jump in sales came despite a recessionary quarter in Ontario, weakening employment numbers and a Canadian dollar at parity. In Canada, the economic news was light ahead of the long weekend for Ontario, as the Office of the Superintendent of Bankruptcy reported that the number of bankruptcies in June declined 5.6% from the previous month, but was up 3.3% on an annual basis. Both consumer and business bankruptcies fell in June, with 7,013 individuals filing for bankruptcy during the month compared with 7,364 in May. On the business side, 465 companies filed for bankruptcies, down 16.1% from May's total of 554. Canadian markets will be closed on Monday for the holiday. In Europe, a sharper-than-expected decline in German retail sales and the UK's manufacturing PMI were among the macroeconomic events, along with downward revisions to some of the preliminary statistics of manufacturing in the euro zone. On Friday, the Federal Statistical Office (Destatis) reported that German retail sales fell 1.4% month-over-month in June following May's 0.5% gain. However, economists had expected a less pronounced drop of 0.5%. May's figure was revised down from an initial reading of 1.3%. German retail sales also surprised to the downside in annualized terms, falling 3.9% against predictions of only a 0.8% decline for the month. Conversely, May had seen a 1.0% gain in sales, revised up from 0.7%. Markit Economics reported that the UK manufacturing PMI fell to 44.3 for the month, its lowest level since December 1998. Economists had expected a less pronounced decline to 45.5 after the index had fallen to 45.9 in June, revised down from an initial reading of 45.8. Markit Economics also released its final estimates for the euro zone manufacturing purchasing managers' index in July, and reported that the PMI fell to 47.4, the lowest level since June 2003. Disaggregating the data, the economics firm noted that the manufacturing output index for July had slipped to 46.7 in the month, down from the initial estimate of 46.9, as well as the 49.6 level seen in June. By Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it with contributions from Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Steve Stecyk, sstecyk@econoicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, ssussman@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it CEP Newswires - CEP News © 2008. 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