Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 30 August 2017 at 4:55 GMT

3 Numbers: Analysts see a mildly firmer rise in US payrolls for August

editor/analyst /
United States
  • Eurozone economic sentiment should more or less hold steady in the EU report
  • There should be a firmer rise in US private-sector payrolls in ADP’s August release
  • The 10-year Treasury yield’s downtrend shows no sign of reversing
  • The big question is whether North Korea’s latest affront to global order is just noise
By James Picerno

Economic sentiment for the Eurozone in August is on tap today courtesy of the European Commission's data. In the US, the ADP Employment Report for August will be widely read ahead of Friday’s official nonfarm update from Washington. Meantime, keep your eye on the benchmark 10-year Treasury yield, which fell sharply on Tuesday following the North Korea’s latest missile launch.

Eurozone: Economic Sentiment (0900 GMT) North Korea’s firing of short-range missiles over northern Japan has put markets on edge – again. But it’s unclear if this is another head fake.


A SMBC Nikko Securities strategist believes the current investor risk-off stance is likely to continue even if the US responds calmly to North Korea provocation. Photo: Shutterstock

Meanwhile, the European Commission’s snapshot of the mood in the euro area will reflect conditions just ahead of the North Korea news. Economists think that the flash data for the consumer sentiment index in August will hold steady at -1.5 (close to a 10-year high) in revised numbers, according to’s consensus forecast.

The first look at the EU’s read on business sentiment will also be published today. The crowd’s looking for the Business Climate Indicator to hold at 1.05 in August, matching last month’s level -- the third-highest print since 2011.

In short, analysts are looking for another round of upbeat economic sentiment data for the Eurozone in August. Taken at face value, an encouraging report will strengthen the case for expecting that the euro area’s economic recovery will endure in the second half of the year. That’s also the message in this month’s PMI survey data. “The latest PMI readings for the Eurozone signal a continuation of the recent strong performance of the currency bloc’s economy,” noted an analyst at HIS Markit.

The bigger question, which will remain unanswered for the next few days, is whether North Korea’s latest affront to global order is noise.


US: ADP Employment Report (1215 GMT) The labour market’s growth rate has been ticking lower over the last two years, but today’s first look at hard data for August is on track to hint at the possibility that the trend is stabilizing.’s consensus forecast calls for private-sector employment to rise 185,000, slightly above July’s 178,000 gain (based on seasonally adjusted data). If the forecast is right, the year-over-year pace will edge up to 2.0% from 1.9%.

A 2.0% annual advance in employment is strong enough to keep the eight-year-old expansion moving forward. Sentiment data suggests as much. This month’s print of the US Composite PMI Output Index, a proxy for GDP, jumped to 56, the highest level in more than two years. “The acceleration signalled for the economy as a whole suggests that GDP growth is still gaining momentum during the third quarter,” said an analyst at IHS Markit, which publishes the PMI numbers

A potential joker in the deck for the economy is Hurricane Harvey, which has devastated parts of Texas. Economists point out that the Houston area – the fourth-biggest metropolitan area in the US and home to key oil-refining and transport infrastructure – plays an influential role in the country’ economy, representing 2% to 3% of national output. The storm’s devastating effects are “absolutely slowing down the recovery,” advised an economist at Moody’s Analytics.

The full extent of the economic price tag won’t be known for months. Meantime, today’s data is expected to show that the US labour market remained on a moderately firm growth path when the storm hit.


US: 10-Year Treasury Yield Maybe it’s North Korea’s latest missile launch and jitters about economic blowback due to the devastating hurricane in Texas. Whatever the reason, this week’s rush into safe-haven Treasuries dispensed more downside momentum for the benchmark 10-year Treasury yield.

At one point in Tuesday’s trading the 10-year rate fell below 2.10% for the first time in nearly 10 months, extending the slow slide that’s been in force for much of the year.

The latest drop in yield is partly due to the surprise factor in North Korea’s newest provocation. “Some observers had thought the US and North Korea were pursuing discussions behind closed doors, but it turns out North Korea continues to pursue missile development,” a senior strategist at SMBC Nikko Securities told Bloomberg yesterday. “The risk-off stance is likely to continue even if the US responds calmly.”

From an economic perspective, the case is weak for expecting lower yields. Indeed, some projections for third-quarter GDP growth call for a solid acceleration. The Atlanta Fed’s GDPNow model, for instance, is currently forecasting that output will ramp up to 3.4% (as of August 24), or well above Q2’s 2.6% rise (per government data prior to today’s revised GDP estimate for Q2).

Ill-advised or not, the Treasury market's near-term outlook has turned cautious once more, driven by the combination of events in North Korea and the unknown economic repercussions from Hurricane Harvey.

How the Trump administration reacts is also a key variable, perhaps for the better. “Our interpretation of the present danger ebbs and flows with Trump’s response,” said the chief market strategist at Wunderlich Securities. “With a more measured response from the administration, rather than the ’fire and fury’ comment that we’d seen earlier, we see a less dramatic effect on the market.”

– Edited by Robert Ryan

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James Picerno is a macro analyst/editor at Follow James or post your comment below to engage with Saxo Bank's social trading platform.


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