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 / 10 April 2017 at 4:55 GMT

3 Numbers: US labour indices in focus after weak March payrolls data

editor/analyst /
United States
  • Rising Eurozone stocks suggest Sentix Investor Confidence Index will tick higher
  • Firmer growth has spurred calls for the ECB to start tightening monetary policy
  • Fed’s Labor Market Conditions Index may weaken in the wake of soft US jobs data
  • CB's Jobs Trends Index offers another view of last month's labour conditions

By James Picerno

Two multi-factor indices that track the US labour market will be widely read in the wake of last week’s disappointing payrolls report for March. We’ll also see an update of the Sentix Investor Confidence Index for the Eurozone. 

 Clearer view ... today’s US Employment Trends Index will offer fresh insights into whether Friday’s disappointing nonfarm jobs report was just a one-off. Photo: Shutterstock

Eurozone: Sentix Investor Confidence Index (0830 GMT) Europe’s economic activity picked up in the first quarter, posting the strongest growth rate in almost six years, according to survey data published last week by IHS Markit. But a variety of risk factors are bubbling, raising questions about the capacity for Q1’s improvement to continue for the rest of the year.

The Eurozone Composite PMI for March points to GDP growth of 0.6% for the first quarter, the chief business economist for IHS Markit said last week. “This is a broad-based upturn among the euro’s largest members.”

Firmer growth is also projected in last week’s Q1 GDP growth estimate via, which is projecting that output will increase 0.67% on quarterly basis over last year’s Q4. That's a healthy round of progress over the 0.4% gain in 2016’s final quarter. The consultancy’s Q2 projection is even stronger, anticipating growth at 0.88%.

Good news, although several risk factors are lurking, including the first round of France’s presidential election later this month. France’s role in the European Union may be hanging in the balance. Meanwhile, firmer economic growth and faster inflation has spurred new calls from some corners for the European Central Bank to start tightening monetary policy.

ECB Executive Board member Yves Mersch on Saturday said that the faster growth is "mostly predicated on the continuation of the extraordinary monetary policy that we have launched but this is a support that cannot go on forever".

Equities in Europe, however, continue to trend high. The Stoxx 50 Index, a benchmark of blue-chip companies in the Eurozone, closed last week near its highest level since late 2015. The bullish trend in the stock market implies that today’s update on investment sentiment in Europe will remain buoyant.

The Sentix Investor Confidence Index in the March profile ticked up to 20.7, the highest reading in 10 years. “Investors rate the current situation exceptionally favourable,” Sentix advised. Considering that Europe’s equity market is up by more than 1% since the last Sentix release, it’s reasonable to assume that’s today’s data will show that sentiment will at least hold steady in the April report.

US: Labor Market Conditions Index (1400 GMT) Employment growth in March decelerated to the slowest pace in 10 months, raising new worries about the economic outlook. Payrolls increased by just 98,000 – well below expectations and less than half the gain in February.

Some economists say that the sharp slowdown, which contrasts with upbeat reports in previous months, may not be as troubling as it appears. One explanation is that the sudden weakness is due to troubles in the brick-and-mortar retail industry; another view is that the soft data is another temporary setback due to weather.

Maybe, but as I noted on Friday, the year-on-year trend in employment growth has been slowing for two years and March’s stumble is par for the course. Is that a sign that trouble’s brewing after all?

An answer may be forthcoming in today’s deeper read on the jobs market via the Federal Reserve’s Labor Market Conditions Index (LMCI). If this multi-factor benchmark continues to print in positive territory, as it has in the previous two reports, the news will offer a degree of comfort for thinking that disappointing employment figures for March may be noise.

In fact, that’s more or less what’s expected, according to’s econometric forecast. Today’s update for March is expected to dip slightly to 1.1 from 1.3. If the prediction is correct, LMCI will remain in positive terrain, offering a relatively encouraging counterpoint to the sluggish employment gain.

US: Employment Trends Index (1400 GMT) The March update of the benchmark published by the Conference Board offers another perspective for evaluating last month’s dramatic deceleration in labour-market momentum.

The chief economist at the Bank of the West on Friday called the slowdown a “disappointment” but noted that “I think it’s more of a blip than a start of a new trend.”

Today’s Employment Trends Index (ETI), which aggregates several labour-market indicators, will offer some fresh context for deciding if Friday’s report can be written off as a one-off event.

When we last checked in with ETI, the outlook was quite rosy. “The Employment Trends Index increased sharply in February, with positive contributions from each of its eight components, providing more evidence that job growth is accelerating,” the Conference Board’s chief economist observed a month ago.

That sounds overly optimistic in the wake of Friday’s release. The question is how today’s March revision for ETI compares? If ETI remains resilient, the news will be an encouraging signal for assuming that the pace of jobs growth will bounce back in the next update for April.

Unlikely? Perhaps, but at least one of ETI's components still looks promising. Last week's update of initial jobless claims fell sharply, close to a multi-decade low – a sign that labour-market momentum is still strong, or at least stronger than the payrolls data for March imply.

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– Edited by Gayle Bryant

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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