Daily Insight
Group Economics Macro & Financial Markets Research
6 April 2016
How long can the US companies keep hiring? Maritza Cabezas Senior Economist Research Tel: +31 20 343 5618 maritza.cabezas@nl.abnamro.com
Aline Schuiling
US service sector shows signs of expansion…
…but underlying components continue to show uncertainty
US job report shows hiring reaches highest level since before the recession…
…but we think that job growth will slow
Weakness in eurozone’s industry compensated by strong consumption
Senior Economist Tel: +31 20 343 5606 aline.schuiling@nl.abnamro.com
US service sector shows signs of expansion… The US services sector reported higher economic activity in March. The ISM nonmanufacturing index increased to 54.5 in March up from 53.4 the previous month. Meanwhile the Markit US services PMI remained weaker, edging up to 51.3 from 51.0. …but underlying components continue to show uncertainty According to Markit, service providers indicated optimism about the year ahead business outlook in March. Nonetheless the latest reading was still low compared to historical levels, reflecting heightened uncertainty. Moreover, input cost inflation remained subdued across the service sector, mainly as a result of lower fuel prices. This had helped offset higher staff salaries. After a rocky start of the year, in which the US economy has been showing some signs of weakness in the first quarter, the improvement in the service sector offers some comfort. After all, the US services sector represents around 80% of the economy. US job report shows hiring reaches highest level since before the recession Another report, the Job Openings and Labour Turnover Survey, painted a picture of a healthy labour market in February. Although US job openings fell from a six-month high, other indicators that show the dynamism of the labour market improved. Indeed, the number of job openings or positions waiting to be filled fell to 5.45 million in February from 5.6 million in the previous month. Meanwhile, hiring increased to the highest level since before the recession, while people quitting a job also rose to 2.95 million from 2.85 in February. The labour market report released some days ago showed a resilient labour market, with the most jobs being created in the service-producing sector. We think that the
Insights.abnamro.nl/en
2
Daily Insight – How long can the US companies keep hiring? – 6 April 2016
demand for labour will moderate in time, given the more modest GDP growth and weaker profit growth.
Hiring and quitters confirm strength US labour market %
2.5
4.5 4
2 3.5 1.5 3 1
2.5 06
07
08
09
11
Quits (lhs)
12
13
14
16
Hires (rhs)
Source: Thomson Reuters Datastream
German factory orders drop … Orders received by Germany’s industrial companies dropped by 1.2% mom in February, following a 0.5% mom rise in January (revised upward from -0.1%). The decline in orders probably reflects the weakness of the global economy in the first few months of this year. Indeed, foreign orders dropped by almost 3% mom in February, whereas domestic orders increased by almost 1%. The stronger euro does not seem to have had a significant downward impact, as orders from within the eurozone were weaker (-3.7% mom), than orders from the rest of the world (-2.1%). Looking forward, we expect orders to pick-up somewhat in the coming months, but to remain sluggish. The global economy will probably expand only moderately this year, while the strong euro will also weigh on Germany’s exports and industrial production. … whereas eurozone retail sales strengthen However, retail sales in the eurozone were stronger than expected in February. They increased by 0.2% mom, following 0.3% growth in January. This strong start to the year bodes well for private consumption during Q1 as a whole. The 3m-o-3m growth in rate in retail sales rose to 0.9% in February, suggesting a significant acceleration in Q1 following a 0.2% expansion in 2015Q4. Combined with accelerating new passenger car registrations in the first two months of this year, this suggests that private consumption strengthened in 2016Q1 following the meagre 0.2% expansion in 2015Q4.
3
Daily Insight – How long can the US companies keep hiring? – 6 April 2016
Day
Date
Time
Country
Monday Monday Monday
04/04/2016 04/04/2016 04/04/2016
10:30:00 15:30:00 16:00:00
EC US US
ECB's Praet speaks Fed's Rosengren speaks New durable goods orders - % mom
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016 05/04/2016
01:00:00 07:00:00 08:00:00 10:00:00 10:00:00 10:30:00 11:00:00 14:30:00 16:00:00 16:00:00
IN US US DE EC EC GB EC US US US
Repo rate - % Fed's Kashkari holds Town Hall on Too Big to Fail Fed's Evans speaks on Economy and Policy Manufacturing orders - % mom PMI services - index Composite PMI output PMI services - index Retail sales - % mom Trade balance - USD bn ISM non-manufacturing, index US Job Openings by Industry
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
06/04/2016 06/04/2016 06/04/2016 06/04/2016 06/04/2016 06/04/2016
CN CN DE US US PL
PMI services - index PMI composite - index Industrial production - % mom Fed's Mester speaks Fed releases minutes from March 15-16 meeting Reference rate - %
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
07/04/2016 07/04/2016 07/04/2016 07/04/2016 07/04/2016 07/04/2016 07/04/2016 07/04/2016
CN NL US CH EC US US EC
Foreign reserves - USD bn CPI - % yoy Fed's Kaplan speaks Foreign currency reserves - CHF mln ECB's Constancio speaks at EU Parliament Committee Fed Reserve consumer credit - USD bn Fed's Yellen in NY with Greenspan, Bernanke, Volcker ECB's Draghi attends meeting of Portuguese President's Council
Friday Friday
08/04/2016 08/04/2016
US GB
Fed's George speaks Trade balance - GDP mln
03:45:00 03:45:00 08:00:00 18:20:00 20:00:00
02:00:00 09:00:00 09:00:00 21:00:00 23:30:00
02:15:00 10:30:00
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Feb F
-2.5
Apr 5
6.5
6.5
Feb Mar F Mar F Mar Feb Feb Mar Feb
-1.2 53.1 53.1 53.7 0.2 -47.1 54.5 5445.0
0.4 54.0 53.7 53.9 0.1 -46.0 54.2
-0.5
Mar Mar Feb
51.2 49.4 3.3
-1.9
-2.5
Apr 6
1.5
1.5
1.5
Mar Mar
3202.3 0.6
3205.5
Mar Mar Feb
571104.0 571104.0 10.5
Mar
571104.0
Feb
-3459.0
ABN AMRO
-0.1
14.9
-3633.3
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/
DISCLAIMER ABN AMRO Bank Gustav Mahlerlaan 10 (visiting address) P.O. Box 283 1000 EA Amsterdam The Netherlands
This document has been prepared by ABN AMRO. It is solely intended to provide financial and general information on economics. The information in this document is strictly proprietary and is being supplied to you solely for your information. It may not (in whole or in part) be reproduced, distributed or passed to a third party or used for any other purposes than stated above. This document is informative in nature and does not constitute an offer of securities to the public, nor a solicitation to make such an offer. No reliance may be placed for any purposes whatsoever on the information, opinions, forecasts and assumptions contained in the document or on its completeness, accuracy or fairness. No representation or warranty, express or implied, is given by or on behalf of ABN AMRO, or any of its directors, officers, agents, affiliates, group companies, or employees as to the accuracy or completeness of the information contained in this document and no liability is accepted for any loss, arising, directly or indirectly, from any use of such information. The views and opinions expressed herein may be subject to change at any given time and ABN AMRO is under no obligation to update the information contained in this document after the date thereof. Before investing in any product of ABN AMRO Bank N.V., you should obtain information on various financial and other risks and any possible restrictions that you and your investments activities may encounter under applicable laws and regulations. If, after reading this document, you consider investing in a product, you are advised to discuss such an investment with your relationship manager or personal advisor and check whether the relevant product –considering the risks involved- is appropriate within your investment activities. The value of your investments may fluctuate. Past performance is no guarantee for future returns. ABN AMRO reserves the right to make amendments to this material. © Copyright 2016 ABN AMRO Bank N.V. and affiliated companies ("ABN AMRO").