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Jobs data signal overall weakening US labour market

The delayed US labour market data for October and November came in weaker than anticipated from an overall perspective, contributing to what some economists describe as a "jobs recession" over the past six months. US retail sales remained also below analysts’ expectations. US stock indices ended Tuesday’s session mixed as investors reassessed the outlook for further interest rate cuts by the Fed. In other news, US crude oil prices fell to their lowest level since early May amid pressure on Ukraine to accept a potential peace deal with Russia. Meanwhile, latest survey results in Europe pointed to a deterioration in business sentiment, while investors were more optimistic. 

  • Date
  • Author Alessandro Fezzi, Content & Publications
  • Reading time 5 minutes

 

US labour market report newspaper

US nonfarm payrolls increased by 64,000 in November, stronger than the median estimate of 50,000. However, payrolls in October declined by 105,000, according to delayed data due to the partial shutdown of federal government agencies. The unemployment rate climbed to 4.6%, its highest level since late 2021. The report showed that recent job creation has been heavily concentrated in health care, which accounted for more than 70% of net gains, whereas government employment fell sharply in October and again in November, Wage pressures continued to ease, with average hourly earnings rising just 0.1% on the month and 3.5% year-on-year, the slowest annual pace since mid-2021, reinforcing Federal Reserve officials’ view that the labour market is no longer a primary driver of inflation. 

US retail sales were unchanged in October compared with the previous month, according to delayed data released by the Commerce Department, undershooting economists’ expectations for a 0.1% increase and following a revised 0.1% rise in September. 

US stock indices ended Tuesday’s session with a mixed performance as investors reassessed the outlook for further interest rate cuts by the Federal Reserve following delayed labour market data. The Dow Jones Industrial Average fell 0.62% to 48,114.26 points, while the S&P 500 slipped 0.24% to 6800.26 points and the tech-heavy Nasdaq 100 rose 0.26% to 25,132.94 points, supported by a record close in electric car maker Tesla, whose shares climbed on optimism over autonomous driving and robotics. 

Asia-Pacific stocks mixed as Japan exports accelerate

Equity markets in the Asia-Pacific region were mixed on Wednesday as investors assessed stronger-than-expected trade figures from Japan and digested an overnight pullback on Wall Street. Japanese exports increased 6.1% year on year in November, accelerating from 3.6% in October and clearly exceeding economists’ forecasts, while the Nikkei 225 was little changed and the Topix edged lower. In corporate news, Japan’s SBI Shinsei Bank jumped more than 12% following a sizeable initial public offering, and Chinese chipmaker MetaX Integrated Circuits surged over 700% in its Shanghai debut, highlighting strong investor interest in artificial intelligence-related hardware. 

US oil prices hit seven-month low

US crude oil prices fell to their lowest level since early May on Tuesday, with West Texas Intermediate briefly falling below USD 55 per barrel. The US benchmark has dropped about 22% so far this year, its steepest decline since 2018, while Brent is down nearly 20% for its worst year since 2020, helping push average US gasoline prices below USD 3 per gallon to a four-year low. The downturn comes as OPEC+ producers have sharply increased output after years of supply restraint, adding to expectations of a surplus, while investors are also factoring in reduced geopolitical risk amid US pressure on Ukraine to accept a potential peace deal with Russia.

Euro-area business sentiment weakens

Business confidence in the euro area deteriorated more sharply than anticipated in December, with the flash composite purchasing managers index compiled by S&P Global declining to 51.9 points from 52.8 in November, whereas economists had expected only a modest drop to around 52.6. The indicator remains above the 50-point threshold that separates expansion from contraction, signalling that overall activity is still growing. However, the manufacturing index slipped further below the growth threshold and the services gauge also fell while staying in expansion territory, with both sectors underperforming expectations.

Business confidence in the United Kingdom strengthened more than expected in December, with the flash composite purchasing managers index from S&P Global rising to 52.1 points from 51.2 in November, while economists had predicted an increase to around 51.5. 

German investors more optimistic according to ZEW survey

Economic expectations among financial market experts in Germany brightened unexpectedly in December, with the ZEW expectations index rising to 45.8 points from 38.5 in November, defying forecasts for a slight decline to around 38.4. ZEW President Achim Wambach said the survey signals a reasonable chance of an economic upturn after three years of stagnation, supported by expansionary fiscal policy, but he cautioned that the recovery remains fragile. Respondents continued to judge the current situation as very weak, with the respective index slipping further to minus 81 points from minus 78.7, somewhat worse than economists had projected.

Corporate and economic calendar

Corporate data in focus: There is no major corporate news scheduled today.

Economic data in focus: UK consumer prices (08:00), Germany Ifo business climate (10:00), euro-area Consumer Price Index (05:00) and SNB Quarterly Bulletin (15:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.