Job growth is mainly driven by private service payrolls

Market Movers

• We estimate non-farm payrolls increased 220,000 in March, slightly above the current consensus of 210,000. Job growth is mainly driven by private service payrolls, which we estimate increased 180,000 in March down from a high of 245,000 in February. Signals for the labour market have been mixed lately. Jobless claims data continue to look solid, with initial claims back at cycle lows. On the other hand, the ISM nonmanufacturing index declined (though marginally) for the fourth consecutive month to 53.4 in February and the employment sub-index declined to 49.7, raising downside risks to employment growth in the service sector. We estimate the unemployment rate was unchanged at 4.9 % in March.

• In the US, one should also keep an eye on the ISM manufacturing index in March. As the regional indices were strong on a broad scale in March, we see this as a sign that the manufacturing sector has rebounded and estimate ISM manufacturing increased to 50.9 in March from 49.5 in February.

• In Scandi markets, the focus today will be on the release of the manufacturing PMIs in Norway and Sweden as well as the release of the credit indicator in Norway. Also, the Swedish market will digest the wage deal agreed late yesterday.

Selected Market News

In Asia, activity in the Chinese manufacturing sector looks to be improving. Both the official NBS manufacturing PMI and the private Caixin manufacturing PMI rose in March to 50.2 and 49.7 respectively – the highest levels recorded since November 2014 and February 2015. In addition, the official non-manufacturing PMI rose to 53.8. It suggests that the Chinese economy is benefitting from recent monetary easing from, e.g. ECB and BoJ, as well as internal stimulus from PBoC. In Japan, on the other hand, businesses are turning less confident. The Tankan index of confidence among Japan’s largest manufacturers dropped to 6 in March from 12 in December – the lowest level since mid-2013. This will put pressure on BoJ to ease monetary policy further, which likely includes cutting the key policy rate further into negative territory.

Yesterday, 600,000 Swedish employees agreed to a deal that will see their wages increase 2.2-2.3% over the next year. The deal is in line with the expiring agreements but substantially below the initial wage claims from the industry at 2.8%. In addition, note that the deal only runs for one year and only involves around 600,000 employees, substantially below the three-year planned agreements and the 1.3m that were supposed to be involved. More details are likely to be released in coming days. The preliminary news supports our view that the Riksbank has been too optimistic in its expectations for wage increases where it had hoped for 3.5% annual increases. The news supports our view that Swedish inflation will continue to undershoot the Riksbank's CPIF forecasts implying that the central bank is likely to maintain a dovish stance by extending QE at the April meeting.

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