Macro Flash: US employment gains held steady

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.