Summary:
1. Real wages in Japan increased for the first time in 27 months.
2. The Bank of Japan is under severe criticism due to the collapse of the Japanese stock market.
3. The Federal Reserve’s Daly says it is still too early to know whether the labor market is truly weak.
4. The Contribution Rule builder says the US is uncomfortably close to recession.
5. U.S. services activity expands in July on positive sentiment.
6. The Reserve Bank of Australia decided to leave interest rates unchanged while the risks of inflation remain upside.
Real wages in Japan rose for the first time in 27 months.
Real wages adjusted for inflation rates in Japan rose by (1.1%) year-on-year in June, and Japan recorded its first increase in 27 months. This positive development reinforces the great possibilities for a recovery in consumption and a positive growth cycle, which the Bank of Japan has long sought. This data is considered good news for the Bank of Japan, which raised interest rates last week and unveiled a quantitative tightening plan. The Bank of Japan is also seeking evidence that wage gains will boost spending and stimulate demand-driven price increases, which will contribute to creating a virtuous cycle.
The Bank of Japan is under fire for a stock market crash.
The Bank of Japan has also come under fire for tightening monetary policy last week, a move that sent Japanese stocks to a historic low and sent global markets into a tailspin. It could also put any further interest rate hikes on hold. “The Bank of Japan needs to be modest about economic data and markets, and economic statistics show it has not paid attention to data,” said Nobuyasu Atago, a former BOJ official and chief economist at Rakuten Securities and Economic Research Institute.
The Federal Reserve's Daly says it's too early to tell if the labor market is really weak.
San Francisco Federal Reserve President Mary Daly said cautiously after Monday's market crash that inflation is coming down and getting close to its target, noting that the labor market is softening, and it's very important that the Fed doesn't let it slow to the point where it pushes itself into deflation, but it's still too early to tell whether the labor market is slowing to a sustainable pace that allows the economy to continue growing or whether it's going to get to a point where there's real, tangible weakness there. Daly noted that the July report released last Friday included a lot of temporary layoffs that could very well be reversed once the next jobs report comes out. As for the high unemployment rate, she pointed to large increases in the number of people in the labor force who appear to be immigrants entering the labor market for the first time. Daly said it takes a long time to find jobs when they first start working. "I'm going to be watching very carefully to see if the next labor market report continues to show the same number or the same dynamic or if it reverses where it is," he said. We cannot respond to a single data point.
The Contribution Rule Builder says the United States is uncomfortably close to recession.
Former Federal Reserve economist Claudia Saham said that although the United States has not yet entered a recession, it is “uncomfortably close,” and she expected that policymakers will readjust their approach to take into account increasing risks. With financial markets declining, many see recession as increasingly likely and that calm is important in such moments.
U.S. service activity expands in July with positive sentiment.
The U.S. non-manufacturing purchasing managers’ index (ISM) came in at 51.4 in July, marking the 47th expansion in 50 months. Steve Miller, chairman of the ISM services business survey, said the rise in the composite index in July was the result of moderate increases in business activity, new orders, and employment indicators. Survey respondents indicated that rising costs were affecting their businesses, but they were generally positive about business activity and believed it was steady or expanding gradually. Respondents remained neutral about the upcoming presidential election.
The Reserve Bank of Australia decided to leave interest rates unchanged as upside risks to inflation remain.
The Reserve Bank of Australia (RBA) continued to leave interest rates unchanged at a 12-year high, waiting for inflation to ease, and also said that policy should be restrictive enough to be confident that inflation is moving consistently towards the target range while raising its forecast for economic growth. Despite the gradual easing, the labor market remains tight, and the unemployment rate rose in June as expected. However, employment rates and average hours worked surprised to the upside, and wage growth remains high, especially in light of weak productivity growth. Job vacancies remain high, and some companies continue to report labor shortages as a constraint on their production.
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