Daily Insight
Group Economics Macro & Financial Markets Research Maritza Cabezas, Georgette Boele
US job report a game changer?
+ 31 20 343 5618
6 May 2015 • • •
Rebound in US labour market expected after upbeat signals… … while US wage growth should pick up moderately, prompting the Fed to hike rates in September UK elections: a parliamentary hung likely, still more downside for sterling
After a weak job market report, rebound expected
ECI – US wage measure gradually picking up
The job market showed signs of weakness in March. Today’s
10y, %
ADP employment report will give a taste of the job market report to be released on Friday. We think that both reports will show further improvement in the labour market after a short interruption. Indeed, after a harsh winter, we expect labour market indicators to make further progress. The most recent FOMC statement released in April already pointed to a more “moderate pace of job gains”, instead of “further improvement “ of labour market conditions as mentioned in the previous statement. The FOMC statement, however, suggested that the slowdown in economic activity during the winter months was
10 9 8 7 6 5 4 3 Q4 2000
5 4 3 2 1 0 Q2 2004
Q4 2007
Wages - Employment Cost Index (rhs)
Q2 2011
Q4 2014
Unemployment (lhs)
only transitory. Actually job gains weren’t much different last year, when a harsh winter took a toll on the economy.
Source: Thomson Reuters Datastream
Upbeat signals in the US labour market
UK elections a parliamentary hung likely
In the past few weeks, however, there have been signs that
Opinion polls put the Conservatives and Labour neck and neck
the labour market is improving. US jobless claims have been
at 34 points each. This suggests that the outcome of UK
reporting historical lows. In the week ending April 25, jobless
elections will be one of the most uncertain since decades. After
claims were at a 15 year low. The employment indexes from
the elections, the lack of a clear parliamentary majority could
most surveys showed improvement since March, except for
require some time for matters to be resolved, even if the
the ISM manufacturing report. We expect a nonfarm payrolls to
intentions are to begin talks quickly with coalition partners.
rise by 225K, following March’s 126K print. Meanwhile the
Although there are still a few days before Thursday’s elections,
unemployment rate should decline to 5.4% in April.
we think that this won’t be a game changer for Conservatives or Labour. Although we will have to wait for the outcome to
US wages to pick up gradually
assess the overall impact on the economy, we think that
We expect Friday’s job market report to show a moderate rise
cyclical forces and the growth outlook are robust enough to
in average hourly earnings in April. Despite a tightening labour
withstand some uncertainty ahead.
market, wage growth has been somewhat subdued until recently. This could be changing. The employment cost index
Still more downside for sterling
(ECI) released last week, which is a broad measure of wage
Overall election uncertainty has not had a profound impact on
and benefit expenses rose 0.7% in the first quarter, up from
sterling, but volatility has been increasing against the euro and
0.5% gain in the last quarter of 2014. On an annual basis,
the dollar in the past days. There is a high likelihood of a hung
labour costs rose 2.6% in the first quarter from 2.2% the
parliament and this political risk will weigh on sterling in our
previous quarter. A number of US firms have announced that
view. So we expect sterling to weaken in the coming days in
they have increased wages recently to attract and retain
the run-up to these elections. In addition, expectations that the
workers. For the Fed a stronger job market report and a firming
Fed will hike before the BoE should also push sterling lower. In
of wages would suggest that core inflation will pick up further.
short, we remain negative on sterling versus the dollar.
This could make Fed officials “reasonably confident “to hike rates. Our view remains that the Fed will hike rates in September.
2
US job report a game changer? – 1 May 2015
Day
Date
Time
Country
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Monday Monday
04/05/2015 04/05/2015
03:45:00 10:00:00
CN EC
PMI manufacturing - index (HSBC) PMI manufacturing - index
Apr F Apr F
49.2 51.9
49.4 51.9
Tuesday Tuesday Tuesday
05/05/2015 05/05/2015 05/05/2015
14:30:00 16:00:00
US US EC
Trade balance - USD bn ISM non-manufacturing, index European Comission Economic Forecasts
Mar Apr
-35.4 56.5
-40.2 56.1
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
06/05/2015 06/05/2015 06/05/2015 06/05/2015 06/05/2015 06/05/2015 06/05/2015 06/05/2015
03:45:00 10:00:00 10:00:00 10:30:00 11:00:00 14:15:00 14:30:00
CN EC EC GB EC US US PL
PMI services - index (HSBC) PMI services - index Composite PMI output PMI services - index Retail sales - % mom ADP nat. employment report - thousands Output per hour nonfarm business sector - % qoq Reference rate - %
Apr Apr F Apr F Apr Mar Apr 1Q P May 6
52.3 53.7 53.5 58.9 -0.2 188.7 -2.2 1.5
53.7 53.5 58.7 -0.3 199.3 -1.8 1.5
Thursday Thursday Thursday Thursday Thursday Thursday Thursday
07/05/2015 07/05/2015 07/05/2015 07/05/2015 07/05/2015 07/05/2015 07/05/2015
08:00:00 09:00:00 09:30:00 10:00:00 13:00:00 14:30:00 21:00:00
DE CH NL NO CZ US US
Manufacturing orders - % mom Foreign currency reserves - CHF bn CPI - % yoy Policy rate - % Repo rate - % Initial jobless claims - thousands Fed Reserve consumer credit - USD bn
Mar Apr Apr May 7 May 7 May 2 Mar
-0.9 522.40 0.4 1.25 0.1 262 15.5
1.3 526.33
Friday Friday Friday Friday Friday Friday Friday
08/05/2015 08/05/2015 08/05/2015 08/05/2015 08/05/2015 08/05/2015 08/05/2015
08:00:00 10:30:00 14:30:00 14:30:00 14:30:00
DE GB US US US CN CN
Industrial production - % mom Trade balance - GDP mln Change in employment private employment - thousands Change in employment total - thousands Unemployment - % Exports Imports
Mar Mar Apr Apr Apr Apr Apr
0.2 -2859 129 126 5.5 -15.0 -12.7
0.3 -2300 223 225.5 5.4 2.9 -9.8
ABN AMRO
-0.5
1.5 2.0 0.4
1.13 0.1
0.1
15.7 0.5 223 225 5.4
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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