Key insights into employment growth and economic sentiment

Assessing China’s economic health beyond GDP

While China’s GDP growth for the {{nofollow}}first quarter exceeded expectations, other key economic indicators such as retail sales, industrial production and fixed asset investment presented a mixed picture. 

In this context, the {{nofollow}}Li Keqiang Index offers an alternative perspective on China’s economic health. Named after Li Keqiang, the 7^th Premier of the People’s Republic of China, this index focuses on three essential indicators: electricity consumption, bank loans and rail freight volumes, which Premier Li favored over traditional GDP as more accurate reflections of real economic activity. 

This chart shows that recently, the Index has tended to suggest more robust economic activity than the official GDP figures, indicating a possible upside bias in assessing China’s economic health. 

India’s economic resilience through alternative growth indicators 

The chart provides a detailed nowcast of India's economic performance, using key indicators such as railway freight earnings, electricity demand and gross credit activity, akin to the alternative measures used in China’s Li Keqiang Index.  

It shows a sustained economic momentum, with the green line indicating that despite fluctuations, the underlying economic structure is poised for continued growth. The differences between the nowcast and the actual GDP data, shown in purple, underscore potential underreported strengths or weaknesses in the economy, offering a more nuanced insight into India's economic trends than GDP figures alone. 

This comprehensive approach reveals an economy that, while facing challenges, demonstrates considerable resilience and potential for future growth.

South Korea’s news sentiment index predicts positive shift in equity earnings

The chart illustrates the relationship between South Korea's news sentiment index and its equity earnings over time, highlighting how changes in media sentiment can precede shifts in financial market performance. 

Developed by the Bank of Korea, the {{nofollow}}Korean News Sentiment Index (NSI) uses natural language processing to analyze news texts from the internet, aiming to gauge the overall economic mood. This index serves as a leading indicator, often predicting economic sentiment around two months in advance of equity earnings reports.

We see that the NSI (in green) fluctuates ahead of the broad market returns of Korean equities (in blue), with noticeable divergences and convergences over the years. For instance, a significant spike in the sentiment index in 2009 precedes a rise in equity earnings, suggesting that positive news sentiment was an early signal of improving economic conditions that eventually reflected in financial statements.

Currently, the NSI indicates an uptrend, suggesting a positive outlook on the economy that may soon be reflected in equity earnings. This makes the NSI a valuable supplementary tool for investors and analysts looking beyond traditional financial metrics and valuations to assess the market outlook for Korean stocks. 

US reports slow job growth in March 

US job growth slowed more than expected in April. Nonfarm payrolls increased by 175,000 jobs, the smallest increase in 6 months. In addition, revisions from the Bureau of Labor Statistics showed 22,000 fewer jobs created in March and February than previously reported. This jobs report falls far below the yearly average of 233,000 jobs and puts it more in line with the pre-pandemic mean which is 190,000.

Signs of a cooling labor market bring some optimism about the possibility of a sooner rather than later cut from the Federal Reserve. 

Federal Reserve maintains rates amid inflation concerns

This chart displays the implied probabilities of future Federal Reserve interest rate levels based on Fed Funds futures trading, offering a snapshot of market expectations for US monetary policy across several upcoming FOMC meetings. 

Notably, while the current rates are maintained at 5.25% to 5.50%, the market sentiment shifts significantly towards a lowering of rates by the end of 2024. This trend suggests a growing anticipation of an easing monetary policy, reflecting the Fed’s cautious approach to achieving sustained progress towards its 2% inflation target before considering any rate reductions. 

The Fed's decision to keep rates unchanged, despite persistently high inflation above 3%, coupled with a strategic slowdown in balance sheet reduction, aims to stabilize the financial system and manage liquidity effectively, preventing potential shortages of reserves reminiscent of the 2019 quantitative tightening issues. 

These policies highlight the Fed's meticulous approach to monetary adjustments, indicating a deliberate path forward amidst evolving economic conditions, which remains critical for global financial markets and has significant implications for developing nations and emerging markets facing pressures from a strengthening US dollar.

Surge in employment across most sectors post-pandemic

The Covid-19 pandemic has profoundly altered employment dynamics across various sectors globally. The above chart delves into the employment changes within the global large-cap market, comparing employee numbers in different sectors to those at the onset of the pandemic in Q1 2020. 

It shows that nearly all sectors experienced an increase in employee numbers. Notably, the energy, consumer cyclicals and non-energy materials sectors have seen the most significant increases, each expanding their workforce by over 57%. The Industrials sector, which ranks second in terms of absolute employee count, has also seen a substantial rise, with a 53% increase.

However, not all trends are positive; the telecommunications sector has experienced a 13% reduction in personnel, highlighting the varying impacts of the pandemic across different industries.