The US and China continue to diverge

<p>Kia ora,</p><p>Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news of more of the same - continuing American economic strength, worries about China's prospects.</p><p>The number of American filing for <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20231958.pdf" target="_blank"><strong>new jobless claims fell to +190,000</strong></a> last week which is their lowest since February. A rise to +234,000 was expected so this is a much better-than-anticipated result. There are now 1.75 mln people on these benefits, also much lower than expected. The US labour market is remaining much stronger than almost anyone thought by the end of Q3. With this sort of continuing run, it is hard to see their September non-farm payrolls showing the weakening that has long been foreshadowed - and hoped-for by the Fed.</p><p>American labour costs are rising (+2.2%) and with the extended labour market pressures this isn't really a surprise. But it is a surprise that pay rates are rising faster (+5.7%) than inflation (+3.0%), and they are getting <a href="https://www.bls.gov/news.release/prod2.nr0.htm" target="_blank"><strong>good labour productivity</strong></a> at the same time (+3.5%). Rarely do you get a 'virtuous combination like this in tight labour markets. It is actually quite remarkable.</p><p>On the labour front, the GM workers union <a href="https://www.bloomberg.com/news/articles/2023-09-07/gm-offers-union-workers-a-16-raise-in-pay-to-head-off-strike?srnd=premium" target="_blank"><strong>rejected</strong></a> the carmaker's +16% <a href="https://www.gmnegotiations2023.com/public/us/en/negotiations/home.html" target="_blank"><strong>wage offer</strong></a> as far below their asking +46% demand. Such are levels in a hot labour market.</p><p>In Canada, they have their own positive surprises. Their widely-followed <a href="h