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The Guardian - UK
The Guardian - UK
Business
Nick Fletcher

US jobs growth much worse than expected; Greece and EU creditors agree deal - as it happened

A job-seekers waits for work at the Command Center temporary employment agency in Williston, North Dakota.
A job-seekers waits for work at the Command Center temporary employment agency in Williston, North Dakota. Photograph: Robyn Beck/AFP/Getty Images

Wall Street edges higher despite Syria attack and weak jobs data

With a combination of the US attack on Syria and much weaker than expected jobs numbers for March, it is no surprise that Wall Street has got off to a cautious start.

But there is no real panic selling, and after an initial dip the Dow Jones Industrial Average is now just about in positive territory, up 5 points or 0.03% . The S&P 500 opened down a mere 0.09% and the Nasdaq Composite is marginally ahead.

In Europe Germany’s Dax is down 0.3% and France’s Cac 0.1%. The FTSE 100 has added 0.3%, helped by a good performance from Randgold Resources as the gold price climbs.

On that note, it’s time to close for the day. Thanks for all your comments and we’ll be back on Monday.

US markets look like they may well shrug off the disappointing jobs figures:

IMF welcomes Greece progress

Back with Greece and after eurogroup head Jeroen Dijsselbloem confirmed their had been discussions with the International Monetary Fund this week, comes a reasonably upbeat statement from that very organisation. IMF spokesperson Gerry Rice said:

There has been important progress in recent weeks. A number of policy issues remain outstanding. But we are at a point where we think there are good prospects for successfully concluding discussions on these outstanding policy issues during the next mission to Athens. Such an agreement on policies will have to be followed by discussions with euro area countries to ensure satisfactory assurances on a credible strategy to restore debt sustainability, before a program is presented to the IMF Executive Board.

The IMF headquarters in Washington.
The IMF headquarters in Washington. Photograph: Zach Gibson/AFP/Getty Images

Updated

Here’s our report on the disappointing jobs figures:

The US economy added just 98,000 jobs in March as a cold snap, a government hiring freeze and a faltering retail sector appear to have put the chill on president Donald Trump’s promise to boost hiring.

The jobs market had got off to a flying start in 2017, adding an average of 236,500 jobs a month. February’s jobs report was the first under Donald Trump and was seized upon by the president as evidence that his promise to bring back US manufacturing jobs was coming true.

Economists had been expecting the economy to add 180,000 jobs in March but a combination of factors appear to have stalled the growth in the jobs market.

March saw snow storms sweep across much of the eastern seaboard which may have slowed hiring. And in late January Trump ordered a civilian government hiring freeze, calling for no vacant federal positions to be filled and none to be created until his budget director has drawn up a long-term cost-cutting plan. That decision will only now be filtering into the jobs figures.

Retailers lost 30,000 jobs in March as many of its biggest names announced plans to shut stores in the face of online competition. In the past several months, Macy’s has announced it will close 63 stores; Sears, 150; The Limited, 250; BCBG Max Azria, 120; Guess, 60; American Apparel, 104; Abercrombie & Fitch, 60; JCPenney, up to 140.

There was some good news. The unemployment rate declined to 4.5% and average hourly earnings rose 2.7%, or 68 cents, from a year earlier.

The full story is here:

The non-farms report does not really give a clear message on the state of the US economy, says James Knightley at ING Bank:

The headline from the US jobs report is the big miss on payrolls, which rose only 98,000 versus expectations of a 180,000 rise. We had been looking for a soft figure, but certainly not this poor. We reasoned that unseasonably warm weather had helped boost construction activity and jobs in January and February (when building sites often typically shut down), so we wouldn’t get the usual bounce in March and this does appear to have happened – construction jobs rose 34k in Jan and 58k in Feb, but only 6k in March.

However, there was some real disappointment in retail trade, which saw employment fall 30k after a 31k drop in February while transport services also saw two consecutive monthly falls (-27k in March after -16k in February). This seems to tally somewhat with weaker consumer spending data and is something worth watching.

On the other side of the equation, the unemployment rate dropped to 4.5% (lowest since 2007) from 4.7%. Using this household survey, employment has risen 920,000 in the past two months so there is a real contradiction with the employment survey, which will only add to the confusion on how to interpret the report. Rounding out the figures, wages rose 0.2%/2.7%, which was in line with market expectations. Unfortunately, given the lack of a clear message from this report it is difficult to come up with a simple conclusion.

For now we are forecasting just one additional Fed rate rise this year, but consumer spending will be a key story to watch. Spending growth has been fairly soft recently, which may be the result of households starting to feel a squeeze on spending power now that the cost of living (CPI at 2.7%YoY) is increasing at the same rate as wage growth. Weak spending growth is also consistent with the poor retail jobs numbers within the report. Nonetheless, consumers are upbeat with sentiment close to cycle highs.

This is likely to be down to the healthy jobs market, but could also be partially due to President Trump’s promises of “massive” tax cuts. If tax cuts are delayed or watered down by Congress then we may see sentiment drop back. In an environment where consumer spending is looking a little vulnerable the market may consider scaling back its expectations for Fed policy tightening – next week’s retail sales report could be an interesting barometer.

Here’s some reaction to the weak US jobs numbers:

Kully Samra, UK Managing Director at Charles Schwab:

While we saw strong results in January and February, boosted by better weather, conversely, March has been impacted negatively by the reverse. However, one slightly disappointing month does not constitute a wholesale change in fortunes. We’ll need to see more hard data before we know whether these numbers are the start of a downward trend away from the strong jobs market or merely a temporary blip on the radar.

Investors are facing the realisation that “soft” data—such as confidence readings and business surveys—doesn’t necessarily translate immediately into “hard” data—like retail sales, capital expenditures, and industrial production. It’s this hard data that translates into economic growth and increasing profitability. Looking at some of the parabolic moves in recent confidence surveys, it would be difficult for hard data to keep up.

US stocks have suffered some downward pressure recently as overly optimistic investor sentiment has boiled off, however, the economy is robust, earnings have picked up, and we expect the bull market in American equities to run for some time.

David Morrison, Senior Market Strategist at Spreadco:

While March’s NFP consensus expectation has held steady around 175,000, Wednesday’s strong ADP release caused many analysts to revise up their forecasts. It’s fair to say that quite a few traders were looking for job gains of around 200,000 today

Unemployment Rate fell to 4.5% and has held at 5% or below for 18 months now – representing full employment for the longest period since the Financial Crisis.

Of course, Average Earnings are key as these are vital in flagging up inflationary pressures and these were steady at +0.2% month-on-month.

There is also the worry that fiscal stimulus may take longer to come through than is currently priced in to markets. If the Trump administration finds it is unable to push through tax cuts, regulatory reform and infrastructure spending this year, then we could see a significant pull-back in equity prices.

Dennis de Jong, managing director at UFX.com:

With interest rates hiked last month, and President Trump’s pledges to put jobs at the heart of his presidency, March’s drop in non-farm payroll will bring both surprise and concern, especially with price growth on the rise.

Uninterrupted jobs growth since last August, combined with rising inflation and accelerating wages, contributed to the rate increase at the most recent Fed meeting.

The Fed has forecast two more rises in 2017, and while this will please savers, Trump will likely have to deal with the political fallout as consumers begin to feel the pinch.

Naeem Aslam, Chief Market Analyst at Think Markets UK:

The US NFP data has confirmed that February’s blowout number was an anomaly since many were arguing that the rise is chiefly caused by mild weather conditions. Consumer spending is the cornerstone of the US economy, and we know that so far this quarter, this number has been in a massive trouble. If we want to see robust GDP growth, we need this number to bounce back strongly and the only way that we can see this happening, is mainly due to higher wage growths.

The 98,000 jobs added in March was the lowest figure for ten months, with the retail sector shedding workers for the second month in a row.

But the unemployment rate fell form 4.7% to 4.5%, said the Bureau of Labor Statistics, the lowest level since May 2007.

The January and February figures, although revised down, were still above 200,000 and benefitted from warmer weather leading to employment growth in areas like construction and leisure. But falling temperatures and storms in March seem to have hit the hiring rate.

Non farm payrolls
Non farm payrolls Photograph: Bureau of Labor Statistics

Updated

US job figures much worse than expected

President Trump may be putting a lot of emphasis on job creation, but the widely watched non-farm payroll figures for March have come in much lower than expected.

In all 98,000 jobs were added last month, well down on the forecast 180,000. And February’s figure was revised down from 235,000 to 219.000 while January was cut from the initial 238,000 to 216,000.

Back with the UK, and the National Institute for Economic and Social Research says weak retail sales hit GDP growth in the first quarter.

Its monthly estimates of GDP show output grew by 0.5% in the three months to the end of March, unchanged from the three months to February. In the final quarter of 2016, growth was 0.6%. NIESR’s James Warren said:

We estimate growth slowed slightly in the first quarter of 2017 to 0.5 per cent. A key component of this moderation has been relatively weak retail sales in the first two months of this year. Consumption is expected to moderate further this year as increasing inflation erodes households’ purchasing power. We expect the Bank of England to look through this temporary shock to inflation and for monetary policy to remain accommodative.

Earlier came weak UK industrial production, manufacturing output and trade figures.

Updated

Over in Athens protestors aligned with the communist party workers’ union, Pame, are already gearing up for action announcing mass protests nationwide, writes Helena Smith.

The labour organisation has called on workers nationwide to take to the streets. A mass demonstration will be held outside the Greek parliament later this afternoon with some protests also taking place on far-flung Aegean islands such as Ikaria tomorrow.

“The government has agreed to further butcher the labour and social security rights of workers,” Pame said in a statement adding that the new measures had been drafted in cahoots with industrialists, the European Union and hated International Monetary Fund.

And more from Dijsselbloem following the meeting:

And here’s the eurogroup statement on Greece:

The Eurogroup was briefed on developments in the intense talks between the European Commission, the European Central Bank, the International Monetary Fund and the European Stability Mechanism and the Greek government over the past month.

The institutions and the Greek authorities reached an agreement on the main elements of policy reforms required to move ahead with the second review of the current macroeconomic adjustment programme, which is necessary to unlock further financial assistance to Greece. This agreement refers to the size, timing and sequencing of the reforms.

The Institutions will continue technical work in Athens as soon as possible to swiftly conclude a staff level agreement.

Updated

Senior officials in Athens are saying whatever deal was agreed at the eurogroup meeting in Malta today, agreement must now be put to the Greek parliament for a vote … which is where things may get testy. Helena Smith reports:

The Greek finance minister Euclid Tsakalotos and prime minister Alexis Tsipras will now need all their persuasive powers to ram whatever measures have been agreed with creditors through parliament. In recent weeks, leading figures in Syriza, the governing left-wing party, have voiced deep disgruntlement over the concessions Tsakalotos has had to make to wrap up the compliance review at the heart of Athens’ latest standoff with creditors.

Tsakalotos, addressing reporters in Malta, was quick to give a hint of the disquiet that lies ahead saying: “There are things that will upset the Greek people.”

Greek interior minister Panos Skourletis.
Greek interior minister Panos Skourletis. Photograph: Michalis Karagiannis/Reuters

Speaking to the Guardian, the Interior Minister, Panos Skourletis, an outspoken critic of the austerity Greece has had to accept in exchange for emergency bailout funding, said much would depend on the “final picture” that emerged.

The measures, he said, would likely be put to parliament (in the form of emergency legislation) after Easter.

“I don’t think it is possible that they will be brought to parliament before Easter because it closes next Wednesday,” he told me. “The devil is in the detail. We don’t have a final picture yet … ideologically all of us in Syriza have disagreed with these policies, measures that only stoke recession, since the great compromise our government was forced to make in the summer of 2015.”

Updated

Updated

The eurogroup press conference is over, but Greek finance minister Euclid Tsakalotos is now speaking:

Tsakalotos
Tsakalotos Photograph: Orestis Panagiotou/EPA

Despite the optimism Dijsselbloem warned time was still running out:

The situation in Greece is not improving, it is all our faults, we are taking too long, the momentum is slipping away. We need to get it done well in time for the next Greek payment.

Updated

'We have solved all the big issues' - Dijsselbloem

Jeroen Dijsselbloem is asked whether the International Monetary Fund, which has been reluctant to join further bailouts without debt relief, agrees with this result.

He says there have been talks with the IMF and he couldn’t have made this announcement without agreement.

On the return of the inspectors, he said now the main agreements have been reached, it was just a practical question as to when they return:

There is nothing withholding the mission going back, we have solved all the big issues. It is very important they go back.

Updated

Comments on Greece at the eurogroup press conference from European Commissioner for Economic and Financial Affairs Pierre Moscovici:

And the European Central Bank’s Benoît Cœuré:

(DSA is the debt sustainability analysis.)

Updated

Greece - agreement on overarching reforms

An agreement between Greece and its creditors on overarching reforms has been reached. Further work will continue in the coming days and inspectors will return to Athens as soon as possible, according to eurogroup head Jeroen Dijsselbloem.

Dijsselbloem says the “big blocks” have been sorted out.

Dijsselbloem
Dijsselbloem Photograph: Eurogroup

The eurogroup press conference will be transmitted live here when it starts.

Well, that was quick:

Here’s our full story on Carney’s speech:

Keep an open financial systems after Brexit - Carney

The Bank of England governor has made an impassioned plea for politicians not to give into protectionism on banking rules when negotiating Britain’s exit from the EU but to keep an open financial system.

A week after prime minister Theresa May triggered article 50, formally beginning the process of the UK withdrawing from the EU, Mark Carney used a speech on the financial system to challenge those who want to cut the UK’s access to the rest of Europe after Brexit.

Highlighting what he believes is at stake if Brexit results in the City being cut off from the rest of Europe, Carney sought to portray London as a key part of the global financial system and reiterated his earlier claim that “London is Europe’s investment banker”.

He said that repair work to the financial system since the global crisis had made it safer, simpler and fairer and that the UK had gone beyond the minimum global standards, meaning others could others could rely on it as a “pillar of strength for the international monetary and financial system”.

But describing Brexit negotiations as a “litmus test for responsible financial globalisation”, Carney suggested such gains were now at risk.

“A decade of hard fought financial reform creates enormous opportunities,” Carney said in a speech in London’s Canary Wharf financial district on Friday.

“It is all too easy to give into protectionism, but the road less taken is often the most rewarding.”

There is question and answer session with Carney so there may well be questions about the morning’s weak UK data and its impact on interest rate policy.

The UK figures point to a slowdown in GDP growth, says Howard Archer of IHS Markit:

A disappointing package of data for the UK economy which fuels suspicion that GDP growth slowed markedly, largely due to consumers becoming more cautious. We suspect UK GDP growth in the first quarter of 2017 slowed to 0.4% quarter-on-quarter from 0.7% quarter-on-quarter in the fourth quarter of 2016 – this would be the weakest growth rate since the first quarter of 2016.

Industrial production and (especially) construction output fell back appreciably in February while the trade deficit widened, admittedly partly due to erratic items lifting imports.

There was some limited, much needed relief on the prices front as prices of imported traded goods dipped 0.9% month-on-month in February as sterling was modestly firmer and oil and commodity prices came off their highs. Even so, import prices were up 9.9% year-on-year.

Updated

Britain’s unseasonably warm weather in February is being partly blamed for the fall in industrial production.

The Office for National Statistics said:

The monthly decrease in electricity and gas was largely due to falls in both electricity generation and in the supply and distribution of gas and gaseous fuels; this was largely attributable to the temperature in February 2017 being 1.6 degrees Celsius warmer than average.

Here’s Reuters on the UK data:

British industrial output fell unexpectedly in February and manufacturers struggled, according to official data on Friday that added to signs economic growth may have slowed as Britain prepares to leave the EU.

Industrial output fell 0.7 percent in February, worse than all forecasts in a Reuters poll of economists that pointed to a 0.2 percent increase and following a 0.3 percent decline in January.

Separate figures showed Britain’s goods trade deficit unexpectedly hit a five-month high in February and January’s deficit was revised up too, the Office for National Statistics said.

Another batch of figures showing a slump in construction output chimed with recent business surveys that suggested Britain’s economic performance probably peaked towards the end of last year.

The latest ONS data suggested manufacturing was not making up for signs of a consumer spending slowdown as some economists had hoped following the pound’s post-Brexit vote drop.

Output in manufacturing, which accounts for about 10 percent of Britain’s gross domestic product, unexpectedly fell 0.1 percent following a 1.0 percent fall in January, disappointing against forecasts for a 0.3 percent rise in the Reuters poll.

Updated

There are also some poor UK construction figures, with output falling 1.7% month on month in February, the biggest drop in almost a year. Year on year, construction output rose just 0.5% compared to expectations of a 1.9% increase.

Here’s how the trade gap is widening, with the goods deficit unexpectedly hitting a five month high:

UK trade gap
UK trade gap Photograph: ONS

Updated

Sterling has fallen back after the weak UK data, with the prospect of a change to the Bank of England’s current low interest rate policy receding.

The pound fell to $1.2429 against the dollar before recovering slightly to $1.2438, down 0.22%. Ipek Ozkardeskaya of London Capital Group said:

UK’s manufacturing and industrial production unexpectedly contracted for the second month in a row.

Soft data revived the Bank of England doves and backed the idea that the inflation alone may not be a sufficient reason to raise the interest rates in the UK.

Updated

UK industrial production weaker than expected and trade gap worse

BREAKING NEWS:

Some disappointing numbers from the UK, with industrial production surprisingly falling by 0.7% month on month in February compared to expectations of a 0.2% increase and a 0.4% decline in January. The year on year rise was 2.8%, lower than the forecast 3.7%.

Manufacturing output was also lower, down 0.1% month on month compared to forecasts of a 0.3% rise.

And the trade deficit is the widest since September 2016, with the global goods trade balance coming in at -£12.461bn. Economists had been expecting a figure of -£10.9bn. The Office for National Statistics said gold and aircraft erratic item imports pushed up the overall deficit.

Updated

So far, and despite Russia saying the US air strike on Syria soured relations between the two superpowers, markets remain calm.

The FTSE 100 is virtually flat, down just 0.08% while most European markets are lower but not too dramatically so. And the US market seems to be shrugging off the conflict as well, to judge by the futures market:

UK house price growth falls - Halifax

Signs of a slowdown in the UK housing market.

UK house prices in the three months to March were 3.8% higher than a year ago, according to the Halifax, although this was down from the 5.1% figure recorded in February and was the lowest rate since May 2013.

Prices were just 0.1% higher in March compared to the previous month, the lowest rate of change since October 2016. Martin Ellis, Halifax housing economist, said:

The annual rate of house price growth has more than halved over the past 12 months. A lengthy period of rapid house price growth has made it increasingly difficult for many to purchase a home as income growth has failed to keep up, which appears to have curbed housing demand.

Nonetheless, the supply of both new homes and existing properties available for sale remains low. This, together with historically very low mortgage rates, is likely to support house price levels over the coming months.

Halifax house price index
Halifax house price index Photograph: Halifax

Howard Archer at IHS Markit said:

March’s flat Halifax house price data - following on from lower Nationwide data and the Bank of England reporting a dip in mortgage approvals in February - fuels our belief that the housing market is being increasingly affected by the increasing squeeze on consumers and their concerns over the outlook.

Markedly weakening consumer fundamentals, likely mounting caution over making major spending decisions, and elevated house price to earnings ratios are likely to weigh down on housing market activity and house prices. However, a shortage of supply is likely to put a floor under prices.

Consequently, we believe house price gains over 2017 will be limited to no more than 2.5% - and there is a very real possibility that it could come in lower than that.

Updated

China ready to work with Trump to boost ties - Xi Jinping

Let’s not forget that President Trump is also occupied with meeting his Chinese counterpart Xi Jinping. According to Xinhau News Xi has said he is ready to work with Trump to boost China-US ties.

Updated

'We have achieved results on Greece' - eurogroup head Dijsselbloem

As the eurogroup of finance ministers meet to discuss Greece, there seem to be some hopeful signs that an agreement could be on its way. Eurogroup head Jeroen Dijsselbloem has said ahead of the meeting that it has achieved results on Greece although there will not be a total political deal today.

Although there is always at least one contrarian:

European markets open lower

As expected the uncertainty triggered by the US air strikes on Syria has sent European markets lower, but there is by no means panic.

The FTSE 100 is currently down just 5 points or 0.06% .while France’s Cac, Germany’s Dax and Spain’s Ibex opened 0.4% lower.

Updated

The US may be in the headlines at the moment for the attack on Syria, but as mentioned previously, there is some key economic data out later in the form of the latest jobs figures.

Analysts are expecting US non-farm payrolls to show a rise of 185,000, a drop from February’s 235,000. But there is a chance the figure could be much higher, to judge from this week’s private sector jobs data from ADP. That report showed a better than expected 263,000 number, and while the correlation with non-farms is not consistent, it could mean there could yet be a surprise on the cards. CMC’s Hewson again:

Over the last few months there hasn’t been much more than a 50,000 gap between the two since October last year, which suggests that we’ll likely see a fairly strong number above 200,000, maybe in the region of 230,000.

The wages figure will also be widely watched, since that is an important element in the Federal Reserve’s thinking when it comes to interest rate decisions.

Agenda: Busy day sees UK trade and US jobs data, Mark Carney speech

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Donald Trump’s decision to authorise airstrikes on Syria after this week’s chemical attack has understandably spooked markets. With growing tensions between the US and China over North Korea after the country launched another missile this week, signs that the US could also be at odds with Russia over Syria has added to the unease. Michael Hewson at CMC Markets said:

Today’s military action against Syrian airfields after this week’s chemical gas attack, shouldn’t have been a surprise after Secretary of State Tillerson’s remarks that recent events required a “serious response” however the timing was, coming so quickly afterwards. The action adds a complexity to geopolitics that wasn’t there before given Russia’s support for Syria and Trumps pre-election pledges to try and repair relations with Putin.

The US would now appear to be on a collision course with Russia as Tillerson went on to add that there was no prospect that Assad could remain Syria’s leader in light of the use of chemical weapons, and markets in Europe are likely to reflect this escalation in tensions with a lower open and higher gold prices as safe haven assets attract capital flows.

Gold added more than 1% to $1264 an ounce, its highest level since November, while Brent crude jumped 2% to a one month high on concerns that growing military action could hit supplies.

But with the US suggesting the Syria move was a one off, some of the early knee-jerk reaction has abated, and Brent is currently 1% higher at $55.54 a barrel. Japan’s Nikkei reversed its initial losses to close up 0.4%, while European markets are expected to open only slightly lower.

You can follow the latest developments in our live blog here:

Elsewhere the week is ending with a burst of activity.

On the agenda are UK industrial production and trade figures, the latest Halifax house price index, a speech by Bank of England governor Mark Carney on financial services, US non-farm payrolls, not to mention a Eurogroup meeting on, among other things, the latest attempts to resolve the Greek debt crisis.

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