Daily Insight
Group Economics Macro & Financial Markets Research
1 April 2016
US labour market preview Nick Kounis Head Macro & Financial Markets Research
US labour market to remain strong in March…
… despite modest economic growth
Our central view remains that the Fed will be on hold in the coming months; US
Tel: +31 20 343 5616 nick.kounis@nl.abnamro.com
wage growth still a concern for the Fed
Eurozone inflation improves, but likely to deteriorate again going forward...
…ECB will probably need to ease policy further
Maritza Cabezas Senior Economist Tel: +31 20 343 5618 maritza.cabezas@nl.abnamro.com
US labour market to remain strong in March… The ADP report for March, which is an appetizer for Friday’s labour market report, showed that private employers added 200K workers to the payrolls. The ADP report, which was released on Wednesday, showed that the composition of job growth remains in line with recent trends. Gains in hiring have been concentrated in the service-producing sector, while hiring in the goods-producing sector remains subdued. Other reports, including the Conference Board’s Consumer Confidence Index for March showed that consumer’s expectations of the labour market improved. On Friday, we expect total nonfarm payrolls to increase by 200K and unemployment to remain at 4.9%. … despite modest economic growth This suggests that the labour market remains strong despite modest economic growth. Indeed, economic activity slowed down in the fourth quarter to 1.4% qoq and we expect similar growth in this first quarter. We expect consumption growth to remain moderate. We still assume that the bulk of this slowdown is due to the strong US dollar, which will only slowly fade, as well as a weaker energy sector. We think that this will result in a slowdown in labour demand compared to 2015. Fed positive on labour market, but risks in global economy to keep rates on hold The Chair of the Fed recently mentioned that the improvement in the labour market in the past two years was considerably faster than expected. She suggested that this pace of improvement could be slower if foreign developments were to affect the US economy more adversely. We think that a strong labour market report on Friday will not be a game changer for the path of rate hikes. Our central view remains that the Fed will be on hold in the coming months, since an early rate hikes could unsettle markets and this could restrain growth both in wages and prices.
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Daily Insight – An Easter gift for the ECB - 31 March 2016
US labour market remains strong 000s
%
600 400 200 0 -200 -400 -600 -800 -1000
12 10 8 6 4 2 0 06
07
09
10
12
Non farm payrolls (lhs)
13
15
Unemployment (rhs)
Source: Thomson Reuters Datastream
Eurozone inflation less negative, but more weakness ahead Eurozone inflation became less negative in March. The HICP fell by 0.1% yoy following a 0.2% yoy decline in February, which was in line with consensus expectations. Although energy price inflation became more deeply negative in March (-8.7% following -8.1%), this was more than offset by an acceleration in the core rate of inflation (to 1% from 0.8%). Unfortunately this improvement unlikely represents the start of an upward trend in core inflation. Core inflation was likely pushed up by the early timing of Easter this year, and this effect will more than reverse in April, before normality returns in May. Although we only have broad aggregates, service sector inflation (which jumped to 1.3% from 0.9%) was probably most impacted by the timing of Easter. Details from the German states for instance, point to a surge in the prices of package holidays. …ECB will probably need to ease policy further Meanwhile, underlying inflationary pressures remain weak. The strengthening of the euro is leading to a fall in import prices, and this will dampen core goods price inflation. Indeed, we saw signs of this in March (Non-energy industrial goods prices rose 0.5% yoy from 0.7% yoy in February) and there is further downward pressure in the pipeline. Furthermore, wage growth – a key driver of service sector inflation – is extremely subdued, and there is still slack in the economy. This situation will improve only slowly given the sluggish economic recovery. Inflation is likely to become more negative over the next few months. It will likely turn positive though later in the year as the negative impact of energy prices fades. Nevertheless, given weak core inflation, the outlook remains for inflation undershooting the ECB’s price stability goal for the foreseeable future. Given this, we think the ECB will likely need to ease policy further, most likely by stepping up QE.
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Daily Insight – Further ECB easing - 22 March 2016
Day
Date
Time
Country
Monday Monday Monday
28/03/2016 28/03/2016 28/03/2016
14:30:00 16:00:00
US US US
Tuesday Tuesday Tuesday Tuesday Tuesday
29/03/2016 29/03/2016 29/03/2016 29/03/2016 29/03/2016
01:30:00 10:00:00 11:30:00 15:00:00 16:00:00
Wednesday Wednesday Wednesday Wednesday Wednesday
30/03/2016 30/03/2016 30/03/2016 30/03/2016 30/03/2016
Thursday Thursday Thursday Thursday Thursday Thursday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday
Period
Latest outcome
Consensus
PCE deflator core - % mom PCE deflator core - % yoy Pending home sales - % mom
Feb Feb Feb
0.1 1.7 3.5
0.2 1.8 1.5
JP EC US US US
Unemployment - % M3 growth - % yoy Fed Williams speaks in Singapore S&P/Case Shiller house price index Conference Board cons. confidence - index
Feb Feb
3.3 5.0
3.2 5.0
Jan Mar
0.5 96.2
0.7 93.5
01:50:00 06:30:00 11:00:00 14:00:00 14:15:00
JP NL EC DE US
Industrial production - % mom Producer confidence manufacturing - index Economic sentiment monitor - index CPI - % yoy ADP nat. employment report - thousands
Feb P Mar Mar Mar P Mar
-6.2 3.9 103.8 0.0 213.8
-5.5 103.6 0.2 195.2
31/03/2016 31/03/2016 31/03/2016 31/03/2016 31/03/2016 31/03/2016
09:55:00 10:30:00 11:00:00 11:00:00 13:00:00
DE GB EC EC CZ US
Unemployment change - thousands GDP - % qoq Core inflation - % yoy CPI - % yoy Repo rate - % Fed's Dudley speeks on Financial Crises
Mar 4Q F Mar A Mar Mar 31
0.0 0.6 1.0 -0.2 0.1
-5.4 0.5 0.9 0.0 0.1
01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016 01/04/2016
01:50:00 03:00:00 03:45:00 09:00:00
JP CN CN NE EC GB EC US US US US US US US RU
Tankan business conditions large enterprises PMI manufacturing - index (official) PMI manufacturing - index (HSBC) - flash PMI PMI manufacturing - index PMI manufacturing - index Unemployment - % Change in employment private employment - thousands Change in employment total - thousands Unemployment - % Markit - Flash PMI Univ. of Michigan cons. confidence - index ISM manufacturing - index Fed Mester speaks in NY GDP - % yoy
1Q Mar Mar Mar Mar F Mar Feb Mar Mar Mar Mar F Mar F Mar
6 49.0 48.0 51.7 51.4 50.8 10.3 230 242 4.9 51.4 90.0 49.5
10 49.4 48.4
4Q
-4.1
10:30:00 11:00:00 14:30:00 14:30:00 14:30:00 15:45:00 16:00:00 16:00:00
Key Economic Indicators and Events
ABN AMRO
0.7 92
2.9 103.5 0.0 190
0.7 -0.4
51.8 51.4 51.2 10.3 196 203 4.9
10.3 190 200 4.9
90.7 50.6
90 51.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
Find out more about Group Economics at: https://insights.abnamro.nl/en/
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