Aurelia Butler

Nonfarm productivity, which measures hourly output per worker, increased at a 2.5% annualized rate last quarter, the Labor Department’s Bureau of Labor Statistics said on Thursday.That was an upward revision from the 2.3% pace estimated last month. The upward revision was in line with economists’ expectations. Productivity increased at a 0.4% rate in the first quarter. It advanced at an unrevised 2.7% pace from a year ago.Unit labor costs – the price of labor per single unit of output – rose at a 0.4% rate in the April-June quarter. That was revised down from the previously reported 0.9% pace. Labor costs increased at a 3.8% the January-March quarter and at a 0.3 % rate from a year ago.The Federal Reserve is expected to start cutting interest rates this month against the backdrop of cooling inflation and labor market conditions. Compensation rose at a 3.0% rate last quarter, revised down from the previously estimated 3.3% pace. It advanced at a 3.1% rate from a year ago. More

Barring fresh evidence as investigators examine the fuel system of a jet forced to return to Hong Kong on Monday, manufacturers had been leaning against recommending worldwide checks, sources told Reuters on Wednesday.”We will require a one-time fleet inspection, which may be applicable only to a portion of the A350 fleet, in order to identify and remove from service any potentially compromised high pressure fuel hoses,” the European Union Aviation Safety Agency (EASA) said in a statement. EASA will release an airworthiness directive with details of the inspection later on Thursday, it added. “We acknowledge the information provided by EASA and are working closely with (engine maker) Rolls-Royce (OTC:RYCEY) and the authorities on the implementation of this precautionary measure,” Airbus said. Rolls-Royce did not immediately respond to a request for comment.Airbus and Rolls-Royce briefed airlines on the fallout from the issue earlier on Thursday, sources familiar with the matter said. The A350-1000, the larger of two models in the Airbus A350 family, and its Rolls-Royce XWB-97 engines have been under the spotlight since a Zurich-bound jet was forced to return to Hong Kong after an engine problem, later traced to a fuel leak.Initial investigations have revealed that a flexible pipe feeding a fuel injection nozzle in the XWB-97 engine was pierced, the sources said. More

2,186 people voted in the poll, with the results showing that when asked if Friday’s jobs report will beat or miss the consensus of 164,000, 54% said they expect a miss, and 46% said they expect a beat.A miss could give the Federal Reserve cover to lower rates by 50 basis points instead of 25bps.According to data from the CME Group (NASDAQ:CME) 30-Day Fed Fund futures, the likelihood of a larger 50bps rate cut from the U.S. Federal Reserve in September has seen a notable increase in recent days.The latest Sevens Report said on Thursday that “for the first time in nearly three years, a ‘Too Cold’ jobs report poses the bigger risk to stocks as the growth implications of Friday’s jobs report are more important to investors than whether the jobs report makes the Fed cut 25 bps or 50 bps.””The market would prefer gradual but consistent rate cuts and stable economic growth over dramatic rate cuts and collapsing growth. Put differently, investors are worried the Fed is behind the curve on rate cuts and Friday’s jobs report will either 1) Calm or 2) Exacerbate those fears,” adds the firm.Meanwhile, BofA said in its preview note that it forecasts solid jobs growth in August, expecting nonfarm payrolls to rise by 200k after coming in at 114k in July.”Public sector hiring should rise 30k on the back of local employment. Hence, we see private payrolls rising by 170k. Education & healthcare hiring should remain robust,” they wrote.”We look for the unemployment rate and labor force participation rate to decline a tenth each, to 4.2% and 62.6%, respectively. We think average hourly earnings and average weekly hours will both rise by a tenth to 0.3% m/m and 34.3, respectively,” added the bank. More

Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 227,000 for the week ended Aug. 31, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week.Claims had been bouncing around the 230,000 level since pulling back from an 11-month high in late July as seasonal distortions from the automobile industry and Hurricane Beryl faded. They continue to show no signs of labor market deterioration even as job openings dropped to a 3-1/2-year low in July. The Federal Reserve’s “Beige Book” report on Wednesday described employment levels as “generally flat to up slightly in recent weeks.” It noted that “a few (Fed) districts reported that firms reduced shifts and hours, left advertised positions unfilled, or reduced headcounts through attrition, though accounts of layoffs remained rare.” It added, however, that “candidates faced increasing difficulties and longer times to secure a job.” The labor market slowdown, marked by a big step-down in hiring, has put a 50-basis-point interest rate cut on the table at the U.S. central bank’s Sept. 17-18 meeting. Economists, however, believe the U.S. central bank will kick off its easing cycle with a quarter-percentage-point rate reduction because domestic demand remains solid. The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 22,000 to a seasonally adjusted 1.838 million during the week ending Aug. 24, the claims report showed.The so-called continued claims are near levels last seen in late 2021, consistent with longer bouts of unemployment. The claims data has no bearing on the employment report for August, which is scheduled to be released on Friday, as it falls outside the survey period.Nonfarm payrolls likely increased by 160,000 jobs last month after rising by 114,000 in July, according to a Reuters survey of economists. The unemployment rate is forecast to slip to 4.2% from nearly a three-year high of 4.3% in July. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is chief global strategist at BCA ResearchIf one places a warm glass of water in a freezer, its temperature will steadily decline. Eventually the water will freeze, turning from a liquid to a solid. Nothing new needs to happen to generate this “phase transition”. All that is necessary is for the temperature in the freezer to remain below zero degrees Celsius.Now replace “temperature in the freezer” with “the level of interest rates”. The US economy is cooling in response to tight monetary policy, as evidenced by falling inflation and wage growth. It has not frozen over yet because it was running so hot two years ago. But if the economy’s temperature keeps falling, it will freeze over.In early 2022, there were two job openings for every unemployed worker. Anyone who lost their job back then could walk across the street and find new work. This prevented unemployment from rising.Things are not so simple any more. The job openings rate has dropped back down to pre-pandemic levels. Those who lose their jobs are finding it increasingly difficult to secure new ones. While an influx of people into the labour market has contributed to a rising unemployment rate over the past 12 months, close to half of the increase has been due to job loss.A softening labour market will undermine consumer spending. The personal savings rate stood at 2.9 per cent in July, less than half of what it was in 2019. Excess pandemic savings have been depleted. In inflation-adjusted terms, bank deposits for the bottom 20 per cent of income earners are below where they were in 2019. Consumer loan delinquency rates have risen to levels last seen in 2010, a year in which the unemployment rate was double what it is today. The housing market is showing renewed signs of stress. Homebuilder confidence dropped in August to the lowest level so far this year. Home sales are weak. Housing starts and permits have rolled over. The number of housing units under construction has declined by more than 8 per cent since the start of this year. Unlike in the past, construction employment has not fallen yet — perhaps builders are hoarding labour — but if housing construction continues to weaken, we will see a wave of lay-offs in that sector.Commercial real estate remains under duress. Office vacancy rates are at an all-time high and are still trending upwards. Default rates are climbing in the office, apartment, retail and hotel segments. Regional banks, which account for the bulk of CRE lending, will experience more losses.Manufacturing activity is slowing again. The new orders component of the ISM manufacturing index fell in August to the lowest level since May 2023. In real terms, core capital goods orders have been trending lower for the past two years. Construction spending has been subsidised by the stimulus provided by the Chips Act and the Inflation Reduction Act. While still high in absolute terms, this spending has peaked and will decrease over the coming quarters.The Federal Reserve is unlikely to save the day. The economy succumbed to recession just months after the central bank started lowering rates in January 2001 and September 2007.The market is currently expecting the Fed to cut rates by more than two percentage points over the next 12 months. Long-term bond yields will not fall much from current levels unless it delivers more easing than what the market is already discounting. That is unlikely unless there is a recession.Even if the Fed does deliver more easing than is currently priced in, the impact will only be felt with a lag. In fact, the average mortgage rate that homeowners pay will almost certainly rise next year as low-rate mortgage debt rolls off and is replaced by that with higher rates.In a recessionary scenario, we expect the S&P 500 forward price/earnings ratio to fall from 21 to 16 times and for earnings estimates to decline by 10 per cent from current levels. This would bring the S&P 500 down to 3800, representing a nearly one-third drop from current levels. In contrast, bonds could do well. We expect the 10-year Treasury yield to fall to 3 per cent in 2025. Investors were right to favour stocks over bonds for the past two years. Now, it is time to flip the script.  More

Here are a few key facts about Barnier:* 1951 – Born Jan. 9 in La Tronche, a suburb of the French Alpine city of Grenoble. * 1978 – Elected to parliament aged 27, representing the Gaullist, centre-right Savoie district.* 1992 – Co-organiser of Winter Olympics held at Albertville in his constituency, an event still central to his public image.* 1993-95 – Environment minister.* 1995-97 – France’s Europe minister. * 1999-2004 – EU regional policy commissioner, responsible for grants and subsidies accounting for a third of Union’s budget.* 2004-05 – Foreign minister.* 2007-09 – Agriculture minister.* 2009-10 – EU lawmaker.* 2010-14 – EU commissioner for internal market and services. Negotiated extensive new regulation of financial markets after the global crash, including reforms unpopular in the City of London.* 2016 – Named EU’s Brexit negotiator after Britain’s referendum on leaving the bloc.* 2021 – Failed in a bid to get his conservative party’s nomination for the 2022 presidential election. More

Gold ETFs, storing bullion for investors, are a major category of investment demand for the precious metal, which touched a record high of $2,531.60 per ounce on Aug. 20 amid bets on upcoming U.S. interest rate cuts.However, gold ETFs had three consecutive years of outflows amid high global interest rates, and the latest four months of inflows only managed to trim the year-to-date losses to a net outflow of 44 metric tons.Gold ETFs saw the inflow of 28.5 tons, or $2.1 billion, in August, bringing their collective holdings to 3,182 tons, the WGC, an industry body grouping global gold miners, said in a research note. A stronger gold price and recent inflows pushed the total assets under management to a month-end peak of $257.3 billion in August.The WGC estimates that global gold trading volumes fell in August by 3.2% month-on-month to $241 billion a day due to lower exchange-traded activity on COMEX, however average trading volumes in the opaque over-the-counter (OTC) market rose by 5.9% to $158 billion.With the gold price up 21% so far this year and rising expectations of the U.S. rate cuts, speculators increased their total net long position on COMEX by 17% from July to 917 tons by the end of August, the highest level since February 2020. More