More positive Chinese PMI data lifted equities on Monday. Treasuries sold off too, following the latest US manufacturing ISM report. For sure, there are still significant concerns regarding the state of the global economy. The PMIs for Germany and Japan remain notably weak and will continue to weigh on sentiment.
Nevertheless, there is a recurring theme playing out: despite the purported weakness in manufacturing, this is not showing up in the jobs data. Services are driving the current economic cycle, an important structural shift that suggests too much emphasis has been placed on the manufacturing surveys.
According to Eurostat, unemployment across the Eurozone fell 77k m/m in February. The previous two months were revised to show bigger declines too: January was revised from -23k m/m to -53k m/m, while December was revised from -94k m/m to -124k m/m. The three-month change (-254k) implies very little, if any, slowdown in hiring. The German unemployment rate declined 0.1 percentage points to a fresh post-reunification low of 4.9% last month too, despite claims that it is heading into recession.
In Japan, exports to China have rolled over. However, non-manufacturing employment was up 1.66% y/y in February. Employment in information & communication climbed by 51.9k m/m, the third consecutive monthly increase. The jobless rate fell again to 2.3%. Based on the past relationship with the new job offers-to-applicants ratio, the unemployment rate could dip well below 2.0%, pushing real wages up more quickly in 2019.
