Daily Insight
Group Economics Macro & Financial Markets Research
04 November 2015
US job market preview: stress behind us
We expect a modest improvement in October’s US nonfarm payrolls…,
Senior Economist
… despite some disappointing preliminary job market data
Tel: +31 20 343 5618
US bank lending survey: some tightening in standards, for the first
Maritza Cabezas
maritza.cabezas @nl.abnamro.com
time since 2012
Nonfarm payroll to show modest improvement, as financial stress dissipates For the employment report to be released on Friday, we are expecting an increase of 170K, this is slightly below consensus. This is a moderate increase compared to the last two nonfarm payroll gains, which averaged 139K, and below the average of the first seven months of the year (214K). The expected gains are consistent with an economy that is growing around trend rates and with more stability in financial markets. Preliminary job data, however, a bit disappointing October’s preliminary employment surveys weakened. The employment component of the PMI released earlier this week was quite disappointing, dropping to 47.6 from 50.5 in September. This would suggest that the weakness that we have seen in manufacturing jobs data continued in October. In general, we expect goods-producing employment to remain soft. The impact of the strong dollar has hindered gains in jobs in this category, particularly in export related activities and we don’t expect this to have changed in the next report. Meanwhile the most recent JOLTS report released in October, which looks at the dynamics in the labour market, showed some softness. There were fewer job openings in many service-sector industries, as well as for government employment. Fed is relying on improvement of job market for liftoff FOMC members would like to see an improvement in the labour market as part of the conditions to hike rates. We don’t expect a sharp rebound in October’s nonfarm payrolls data, but moderate growth should continue. For the Fed job gains should be reasonable enough to put behind any doubts about the firmness of the labour market. Chair Yellen mentioned during her intervention on “Inflation Dynamics and Monetary Policy”, that a sustained improvement in the labour market was needed, to reduce slack in in a broad dimension in the labour market, including labour force participation rate and persons employed involuntary part-time from economic reasons. We think that it will still take a
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Daily Insight - US job market preview: stress behind us - 04 November 2015
while for the broad improvement in the labour market to take place and therefore we expect the Fed to hike rates in 2016.
Nonfarm payrolls softer in the past two months 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
Financial stress likely affected lending standards in the US The October 2015 Senior Loan Officer Survey on bank lending conditions in the past three months showed some banks tightened standards for large and middle-sized firms. This is the first time since 2012 that tightening in lending standards occurs. Most firms that said they tightened, cited a less favourable and more uncertain outlook, as well as worsening problems in certain industries. Regarding residential mortgages, firms continued to ease standards. Demand for loans broadly unchanged On the demand side, commercial loan demand was little changed during the third quarter. Meanwhile, on the consumer side, demand for loans weakened for most categories of mortgages, while demand for auto loans was unchanged and for credit cards increased. We think that this report reflects some signs of uncertainty, but we think that lending conditions will not tighten further given that financial stress has dissipated.
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Daily Insight - US job market preview: stress behind us - 04 November 2015
Day
Date
Time
Country
Sunday Sunday
01/11/2015 01/11/2015
02:00:00 02:00:00
CN CN
Monday Monday Monday Monday Monday Monday Monday
02/11/2015 02/11/2015 02/11/2015 02/11/2015 02/11/2015 02/11/2015 02/11/2015
02:45:00 09:00:00 09:30:00 10:30:00 15:45:00 15:45:00 16:00:00
Tuesday Tuesday
03/11/2015 03/11/2015
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
Key Economic Indicators and Events
Period
Latest outcome
Consensus
PMI manufacturing - index (official) PMI non-manufacturing (official)
Oct Oct
49.8 53.1
50.0
CN CH NL GB US EC US
PMI manufacturing - index (Caixin) Total Sight Deposits bn PMI manufacturing - index PMI manufacturing - index Markit - Flash PMI ECB announces weekly QE details ISM manufacturing - index
Oct
47.6
Oct Oct Oct F
48.3 467.4b 53.7 55.5 54.1
Oct
50.1
49.9
50.0
04:30:00 16:00:00
AU US
RBA Cash Rate Target Factory orders
2.0 -1.0
2.0 -0.9
1.75
Sep
04/11/2015 04/11/2015 04/11/2015 04/11/2015 04/11/2015 04/11/2015 04/11/2015 04/11/2015 04/11/2015
02:45:00 10:00:00 10:00:00 10:30:00 14:15:00 14:30:00 16:00:00 16:00:00
CN EC EC GB US US US US PL
PMI services - index (Caixin) Oct PMI services - index Oct F Composite PMI output Oct F PMI services - index Oct ADP nat. employment report - thousands Oct Trade balance - USD bn Sep ISM non-manufacturing, index Oct Fed's Yellen Testified on Bank Regulation Before House Panel Reference rate - % Nov 4
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
05/11/2015 05/11/2015 05/11/2015 05/11/2015 05/11/2015 05/11/2015 05/11/2015 05/11/2015
06:30:00 08:00:00 10:00:00 11:00:00 13:00:00 13:00:00 13:00:00 14:30:00
NL DE NO EC GB GB CZ US
CPI - % yoy Manufacturing orders - % mom Policy rate - % Retail sales - % mom Policy rate - % BoE size of asset purchase programme - GBP bn Repo rate - % Output per hour nonfarm business sector - % qoq
Friday Friday Friday Friday Friday Friday Friday
06/11/2015 06/11/2015 06/11/2015 06/11/2015 06/11/2015 06/11/2015 06/11/2015
08:00:00 09:00:00 10:30:00 14:30:00 14:30:00 14:30:00 21:00:00
DE CH GB US US US US
Industrial production - % mom Foreign currency reserves - CHF mln Trade balance - GDP mln Change in employment private employment - thousands Change in employment total - thousands Unemployment - % Fed Reserve consumer credit - USD bn
ABN AMRO
52.7
50.5 54.2 54.0 53.30 199.50 -48.33 56.9
174.90 -45.72 56.4
160
1.5
1.5
1.5
1.5
0.8 1.0 0.5
0.5
0.5
0.1 0.1
0.1
0.4
0.2
167 178 5.1 17.8
160 170 5.1
Oct Sep Nov 5 Sep Nov 5 Nov Nov 5 3Q P
0.6 -1.8 0.75 0.0 0.5 375.0 0.1 3.3
Sep Oct Sep Oct Oct Oct Sep
-1.2 541540 -3268 118 142 5.1 16.0
54.2 54.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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