So no ‘Fed rate rise looms’ for the US until December thanks to the weaker jobs report for August.
But there was more than just the 151,000 new jobs driving this belief (the market had been looking for a figure of between 150,000 and 180,000 with consensus around 170,000).
A sharper than expected fall in US car sales last month, and forecasts that car sales will fall in 2017 from the likes of Ford, plus weaker than forecast manufacturing data.
The softer than expected US August jobs report leaves a September Fed rate hike (on September 20 and 21) looking unlikely.
US payrolls rose by 151,000 in August with the July report upped from 255,ooo to 275,000, which tells us that the US jobs market is solid. (In effect 171,000 jobs were added in August).
But it was much weaker than expected and on top of that the unemployment rare didn’t change at 4.8%, while wage gains were weak (of just 0.1% month on month or 2.4% year on year, down from 2.7% in July).
August’s survey of US soft manufacturing conditions was weak (and manufacturing shed 15,000 jobs in the month).
Car and truck sales came in at an annualised rate of 16.9 million units in August, down nearly a million from 17.8million in July and 17.7 million in August 2015.
“After more than six years of steady growth, it’s clear the auto industry has finally peaked. Nearly every large automaker suffered sales declines, even as incentive levels rose and truck/SUV sales remained relatively strong”, according to Karl Brauer, a senior analyst for Kelley Blue Book, Reuters reported.
Ford Chief Economist Bryan Bezold said sales had hit a plateau after steadily rising following the 2008-2009 recession. He said demand has now softened and was petering out after years of meeting pent up demand.
Mark LaNeve, Ford’s U.S. sales chief, said the car maker will make fewer sales in 2017 than this year. Results in 2016 are expected to fall short of 2015’s record high sales of 17.47 million vehicles, according
General Motors reckons 2016 sales will reach 17.3 million vehicles, short of the 2015 figure. Interestingly, Ford says its stocks of cars in August was 81 days of supply against 61 days in the same month of 2015, pointing to production cuts and price cutting. Ford last week revealed a zero per cent seven year financing package through Ford Credit to try and shift its surplus metal.
All this is pointing to a sharp fall in car industry activity over the next year and lifting interest rates will not help. Car industry analysts say the next moves will be factory shutdowns and job losses.
There are tens of billions of dollars in car sub prime loans on issue now, a situation that is starting to worry analysts.
And the US Purchase Managers Index showed a surprise dip in August to 49.4 from 52.6 in July with new orders and employment both falling sharply (other surveys though showed manufacturing remaining positive in the month.
As a result US economists say the data is enough to push any Fed rate decision out to December and after the November 8 president and Congressional elections.
