A major source of banks’ optimism is their various expectations of an economic recovery in 2020. It has to be said that this is not widely shared by other forecasters (including both the Fed and ECB this month) although there are not many outright predictions of recession. The November data, including Singles Day, Black Friday and Cyber Monday may be quite encouraging, but still not quite enough evidence that consumers everywhere will keep shopping into and throughout next year. Japan of all places has come up with some good news on GDP growth thanks to some typically drastic revisions to Q2 and Q3, but then spoiled it with the latest wildly erratic Industrial Production numbers and a dismal Tankan (the BoJ’s quarterly business survey).

In the latest ZEW Survey German economists have had another (surprisingly frequent) rush of blood in only the second positive forecast in 2019 and the highest since the heady days of early last year. The November PMI surveys were the same or slightly better just about everywhere except for the UK while the first December flash reports are still grim for Manufacturing in the Euro area The worst headlines are from the UK with GDP flat-lining and Industrial Production still falling. Inflation remains very subdued in most economies with the major exceptions of the US (medical expenses and housing) and China (swine fever). Talking about China, it is hard not to believe the publication of strong November Industrial and Retail Sales is part of the Sino-US trade dispute rather than signalling an unexpected economic recovery despite the dispute: official statistics with Chinese characteristics? Nevertheless, the latest truce that will boost US agricultural exports and ease tariffs on Chinese exports to the US should be a positive for the both economies, albeit how much is still in doubt, while giving rise to the uncomfortable thought that Mr Trump will now switch his ire to the EU.

An unexpected surge in Unemployment in Canada has cast new shadows on the latest labour market data from the US. The figure shows the monthly net hires from ADP (left) and the Bureau of Labour Statistics (right). It is worth noting that the scales are slightly different and that although both lines oscillate around 200K the BLS numbers have been above that level more often.

Perhaps more significantly, over the last 4 months the BLS numbers have been trending higher and the ADP numbers trending lower. Much controversy surrounds the way the BLS compute the Non-Farm Payrolls (which include the public sector): the categorization, huge seasonal adjustments and then subsequent revisions, usually but not always lower. The ADP numbers cover only the private sector and also have regular adjustments but are based on.

While public sector jobs may account for some of them, the differences between the two data sets are important because of the Fed’s reliance on the BLS numbers, especially under Chair Jerome Powell. Just to rub it in, neither data set captures whether the new jobs actually pay a living wage, which matters at a time when medical and shelter costs are shooting up.

To put it bluntly, many economists doubt the US employment numbers are as strong as either ADP or BLS report and believe the economy is not as robust as both the Fed and the Administration think it is.