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[Quick Facts]

1. Canada's job gains in June consolidate the possibility of rate hikes.

2. June non-farm payrolls: Be cautiously optimistic about the downside of aggregate demand in the labor market.

3. Venezuela's crude oil exports rose by 8% in June.

4. EU agrees €500 million deal to ramp up production of ammunition for Ukraine.

5. The U.S. plans to buy another 6 million barrels of oil to replenish its SPR.

6. Look at the NATO summit from three perspectives.

7. Yellen doesn't rule out the possibility of a U.S. recession.

[News Details]

Canada's job gains in June consolidate the possibility of rate hikes

Statistics Canada released data last Friday showing a net gain of 59,900 jobs in June, the most since January and higher than the median forecast of 20,000 jobs, while the unemployment rate rose from 5.2% to 5.4% as more people were looking for work.

The unemployment rate rose for the second straight month in June and is now at its highest level since February 2022, although it remains below the 12-month average before the pandemic.

The employment report for June was the last major economic data from the Bank of Canada before it releases its interest rate decision this Wednesday. The result has reinforced the likelihood that the Bank of Canada will raise interest rates again this week.

June non-farm payrolls: Be cautiously optimistic about the downside of aggregate demand in the labor market

The U.S. Department of Labor announced last Friday that non-farm payrolls increased by 209,000 in June, slightly below expectations of 225,000, while the Department revised the data of the previous two months down sharply by 110,000. The goods manufacturing relies on continued job growth in the hot construction sector, while job increases in private services decreased sharply compared to the previous month, and other industries saw a broad-based slowdown in job gains.

Considering the JOLTS, the NFIB Small Business Jobs Report and the Atlanta Fed's Wage Growth Tracker, the job openings/unemployment rate fell to 1.59 in May, easing the labor hoarding problem for businesses, although hiring remained a problem.

Average hourly earnings rose 0.36% from a month ago, and its 3-month annualized rate of increase rose to 4.6% from 4.2% last month. This month's deceleration in non-farm low-paying service employment, wages in industries with more job increases lower than the overall average, and increased employment contributions from the construction sector led to an overall wage imbalance. Powell has paid less attention to wage inflation, and core inflation excluding rent slowed down last month. The current rate of wage growth also remains stable. Therefore, wage inflation is not much of a concern for pushing up core inflation.

A marginal slowdown has been seen in non-farm payroll growth, but the 209,000 job gains mean that the demand side is still too strong, while the labor supply on the household side is improving slowly. Given the lag of the job market and the upcoming off-season, it is important to remain cautiously optimistic about the downside of aggregate demand in the labor market.

Venezuela's crude oil exports rose by 8% in June

Venezuela's crude oil exports exceeded 700,000 barrels per day in June 2023, up 8% from this May, Venezuelan media reported on 7 July local time, citing data released by the country's national oil company. The data also showed that in the first half of 2023, Venezuela's crude oil exports stood at 670,000 bpd, up about 15% from 585,000 bpd in the same period in 2022. The increase in crude oil exports in June was related to the resumption of operations at some of the country's refining facilities and the improved efficiency of approvals for tankers leaving ports on the country's coast, the report said.

EU agrees €500 million deal to ramp up production of ammunition for Ukraine

The European Union announced on July 7 that it would contribute to the labor market 500 million to ramp up the production of ammunition for Ukraine, as well as to replenish the EU member states' own ammunition stocks. According to the deal, the EU will provide subsidies to some European arms companies to increase their production capacity. The deal is expected to take effect by the end of this month. Since the outbreak of the Russia-Ukraine conflict, the U.S. and the West have continued to send weapons and ammunition to Ukraine. Russia has repeatedly warned that sending arms and ammunition to Ukraine would only prolong the crisis and increase the risk of a direct confrontation between Russia and NATO.

The U.S. plans to buy another 6 million barrels of oil to replenish its SPR

The Biden administration announced last Friday that it would buy an additional 6 million barrels of crude oil to replenish its Strategic Petroleum Reserve (SPR). The administration continues to slowly replenish the emergency reserve. The purchase is scheduled to take place in October and November. It is understood that the historic use of 180 million barrels of U.S. SPR due to the Russia-Ukraine conflict, coupled with other stockpile releases authorized by Congress, has resulted in the reserve size at a 40-year low.

Look at the NATO summit from three perspectives.

NATO will hold a summit in Vilnius, the capital of Lithuania, on July 11. The reason why the summit will be held in Lithuania is that it will strengthen NATO's north-eastern defense against Russia. We can look at the NATO summit from three perspectives:

The first is to see whether Ukraine will join NATO. Volodymyr Zelensky made a whirlwind visit to Europe last week to talk about military cooperation with Turkey and also to lobby for Ukraine's admission to the alliance. NATO is divided on whether to admit Ukraine.

The second is whether Sweden will join NATO. Biden met with the Swedish prime minister at the White House last Wednesday and expressed strong support for Sweden's membership in the alliance. But Biden can't influence Turkey. Turkey said Sweden is harboring Kurdish terrorists and refuses to allow Turkey to extradite journalists involved in the rebellion for trial, and even condones the burning of the Koran by protesters. Turkey therefore required that Sweden change its approach on these points before Turkey agrees to allow Sweden to join the alliance.

The third is the relationship between the four Asia-Pacific countries (Japan, South Korea, Australia, and New Zealand) and NATO. NATO Secretary General Jens Stoltenberg said that a war occurring in the Asia-Pacific region will have an impact on NATO countries, so NATO must establish close relations with the four Asia-Pacific countries. But France believed that NATO needs only to be concerned about Europe and expanding concerns to the Asia-Pacific would be a mistake.

Yellen doesn't rule out the possibility of a U.S. recession

After the pandemic, the U.S. economy has recovered a normal rate of growth driven by policy, and the slowdown in economic growth is reasonable, U.S. Treasury Secretary Janet Yellen said in an interview on the CBS program on July 9 local time. Yellen believes that although the job growth in the labor market slowed in June, we still see the current labor market in good shape. I do not rule out the possibility of a recession in the U.S. labor market after a slowdown in job growth, but the slowdown in economic growth is normal, she added.

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