Head of Macroeconomic Research
Summary: The ADP payroll report for February is out. Job creation reached 183k vs 165k expected. It confirms that the US labor market is still in very good shape despite growing concerns related to the economic impact of the COVID-19.
The ADP payroll report for February is out. Job creations in the private sector reached 183k vs 165k expected. The 3-month moving average is still oriented north, at 186k, which is the highest level since Spring 2018.
The momentum is still positive for small companies (+24k) and for the biggest companies with more than 500 employees (+127k).
On a MoM basis, employment growth is increasing in almost all the sectors, except for mining (-3k), information (-2k) and, without much surprise, manufacturing (-4k). Due to supply chain disruptions resulting from the COVID-19 outbreak, we expect more job destruction in the manufacturing sector in the coming months.
Up to now, the virus has had a limited impact on the service sector, which represents the bulk of job creations in the United States, but the negative effect could be more visible in coming months if demand shock materializes, as feared by many economists. It could result in a slowdown in job growth that could force the US Federal Reserve to step in further. Looking at today’s market expectations, rate futures are pricing a new cycle of easing following the recent emergency rate cut that could take the benchmark rate below 0.6% by early next year.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
