Independent Strategy

Macro Matters

A deeper look at data

Independent Strategy Blog: Macro Matters

Macro Matters is the Independent Strategy high frequency research area.  We aim to try and offer a glimpse into our analytical process by making available some of the files and data we use to analyse macro developments and financial markets.  It also includes some supplemental weekly technical analysis, which helps us measure shifts in sentiment and bigger changes in trends, complementing the work we do on the macro side. If you’d like to discuss anything in more detail, please reach out.

The Omicron drag is still clearly present but the Google activity data through to 16th January paints a more encouraging picture than some had feared as this wave began in late November/early December.  Indeed, the mildness of the disease, alongside its rapid spread seems to have front loaded the hit to activity, which bodes well for a continuing recovery over the next few weeks.

Another weaker than expected headline non-farm payrolls number, with the report stating 199k new jobs were created during the month versus the 400k median guess.  Private sector jobs growth came in at 211k (mkt 365k).  Manufacturing payrolls added 26k (mkt 35k) jobs while government lost another 12k, their fifth consecutive decline.  The revisions however remain upward, with 156k added in October and November compared to the initial release and the average revision over the past year hitting 79.3k.  There was better news on the participation rate, which was revised up to 61.9% and held steady in December.  That underpinned the further decline in the unemployment rate, U3 falling to 3.9% from 4.2% and U6 to 7.3% from 7.7%.  The average work week was stable at 34.7hrs, which is another positive, full-time employment growing while part-time dipped again.

Google activity data has been updated through to the 3rd January 2022 giving us a complete picture as to what happened over the holiday period.  A large drawdown in activity was expected given the lengthy closures we see at this time of year, but the rapid spread of Omicron has added a further dimension to this more normal seasonality.  And the impact of that looks pretty severe.

Google activity data has been updated through to the 12th December and while there hasn’t been any significant reversal, there look to be some signs at the margin that Omicron is starting to drag.  This comes from both the impact the strain is having on case numbers and confidence as well as the impact of more precautionary restrictions are having on activity to try and slow the spread.

Google activity data through to 5 December continues to paint a solid picture of the recovery, with no sign that the appearance of the Omicron variant is restraining either mobility or economic activity.  Most of our sample saw improvements week-on-week, led by US activity which reverted to trend post-Thanksgiving.  Only Russia and South Korea saw a dip, moving our total global measure back to its highs.

A surprisingly soft November non-farm payrolls report, but the devil is in the detail.  Non-farm employment rose 210k (mkt 550k) while private sector jobs growth came in at just 235k (mkt 530k).  Manufacturing payrolls added 31k jobs while government lost another 25k, their fourth consecutive decline.  The revisions upward at least, but not quite at the pace of the past 12-months.

Google mobility figures through to 28th October looked solid.  While we’ve seen rising Covid cases in Europe the impact on mobility and economic activity has been fairly well contained to date.  Indeed, Germany, France and Spain recorded improvements week on week while Italy saw a very mild dip.  The largest drop was recorded in the US but this is merely an effect of the Thanksgiving holiday which are not adjusted for in the raw data.  The drop was comparable to the decline we saw in this period last year. EMs all looking good.

The Google mobility data, through to 7th October, suggests activity has taken a bit of a stumble, with only two of our sample group (the UK and Australia) showing any improvement over the past week.  The standout decliner was again Russia again, which is in something of a localised freefall at the moment.  But we’d downplay the weakness seen in the rest of Europe, the last week of October being a seasonal weak spot due to mid-term school breaks (note the data is not adjusted) and, like the UK the week before, we should see a bounce in the next update.  If we don’t then worry, but not until then.

October has delivered a more robust payrolls report, non-farm employment rising 531k (mkt 450k) while private sector jobs growth hit 604k (mkt 400k).  Manufacturing payrolls were particularly strong, with a 60k gain while government jobs dropped for a third consecutive month, -73k.  The revisions were also strong (September revised up from 194k to 312k and August was also revised higher.  The average monthly revision is now running at 68k for the past 12-months.

The updated Google activity data, through to 31st October, remains encouraging. Bar Russia the picture improved across our pool versus the prior week with Mexico, Germany and India leading the pack. In terms of the breakdowns we saw a solid increase in economic activity, while mobility dipped or was flat. This was particularly visible in Europe and is partly seasonal with mid-term school breaks leading to a dip in mobility in some places. EM trends seem to be generally better than DMs, bar Russia. That is partially due to the persistent stagnation in the US indices, which damper the overall DM storm, Europe and DM Asia all looking solid.


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