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The retreat from Paris

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Media reports are focusing on US President Trump's retreat from the Paris climate accord. This has little near-term impact on the US economy. The promotion of a strategic alliance between the EU and China may shift medium-term policy focus. US competitiveness in new rather than old industry may be impacted in the medium term.
  • The US employment report is today's main focus. Everything indicates an economy that is at full employment. Payrolls data is unlikely to be very strong (as there are not enough workers to hire). US coal mining employed just over 53,000 in 2016. US solar generation employment rose by 51,000 in 2016 (to just over 260,000). With full employment reached, the economic focus is whether the labor market can provide higher incomes. Average hourly earnings are a poor way of judging this (they do not adjust for changes in workforce composition), but markets will still pay close attention to that data.
  • The Eurozone offers producer price inflation – expected to accelerate – which serves as a good guide to overall corporate pricing power. Producer prices are a partial lead indicator of consumer price inflation, but less reliable. A lot happens to producer prices before they become consumer prices.