Despite the holiday-shortened week in the euro area, US markets remain open on Good Friday and even the payrolls are scheduled for Friday. Ahead of the payrolls, we will receive the non-manufacturing ISM, the ADP report, factory orders and weekly claims.
These data should give us a latest update on the economy in the US and whether the labor market continues to improve.
In the previous three months, US payrolls constantly surprised on the upside of expectations. It will be interesting to see whether this encouraging development continues in March. During the December February period, US payrolls grew by an average 245,000, but a somewhat slower, although still decent gain is expected for March.
The consensus is looking for an increase by 205 000, down from 227,000 in February. We believe that employment growth slowed further in the manufacturing sector, while the momentum probably remained strong in the services sector. The trend in the claims remained downward and temporary help payrolls (which are often a good precursor for the overall payrolls) accelerated in February.
We believe therefore that the risks are slightly tilted to the upside, as also upward revisions in the previous months’ data might brighten the overall report. The ADP report on Wednesday will provide us with some more guidance, although we should be careful as the correlation between the ADP report and the official Bureau of Labor Statistics reading is not as close any more as it used to be.
Last week, the US jobless claims surprised on the upside of expectations, which was mainly due to revisions in the seasonal adjustment factors? What exactly this is has everyone guessing?
The downward trend remains however intact as initial claims dropped last week to their lowest level since April 2008. For the week ending the 31st of March, the consensus is looking for a further decline in claims. Initial claims are expected to drop to 356 000, but we believe that the risks are on the upside of expectations, partly due to an upward revision in the previous month’s data.
This week is all about jobs and the Easter Holiday as trading volume should decline once the pass midweek. The jobs data may be overlooked until Monday.