US March non-farm payrolls outlook

After a barnstorming non-farm payrolls (NFP) report in February, where 304,000 jobs were added to the US economy, and average hourly earnings grew by 3.2% year-on-year (YoY), this month might be less thrilling for markets. A number of 184,000 jobs are expected to have been created, still a solid number even if below the magic 200,000. Meanwhile, and in a much more encouraging way, YoY earnings growth is expected to rise to 3.3%, while unemployment is expected to fall to 3.9% from 4%.

In sum, the US, an economy that supposedly hit ‘full employment’ quite some time ago, continues to rummage around down the back of its sofa to find new jobs for its workforce, but is also managing to pay them well. Truly, this is the ‘Goldilocks’ moment that many have hoped for.

Compared to the eurozone, all seems well in the US. The growth domestic product (GDP) in the fourth quarter (Q4) of last year was 2.6% and, while lower than the Q3, it was still above the same period for 2017 and also comfortably above economist forecasts of 1.4%-1.8%.

The broader question for the US economy, and for the Federal Reserve (Fed) policy, is how it will react to broad-based weakness in its vital trading partners in the European Union and China. If the US can avoid being sucked down with them then the outlook is much better, but the interconnectedness of the global economy means that the Fed is probably right to err on the side of caution and see how things pan out.

Of course there are also trade wars to consider, eg US-China trade war. Further, the US President Donald Trump keeps dropping hints about a deal with China, but this carries the risk that he will turn his ire on Europe and German carmakers in particular. There are still risks to the global economic outlook, but with job numbers still rising and earnings increasing too, the US employment picture is not one of them.