US jobs growth cools, but don’t worry – yet
In the US, the monthly payroll report is likely to show slower employment growth. According to consensus forecasts, the US economy is expected to add 145,000 new jobs in January, compared to 155,000 the previous month. In addition, comprehensive annual revisions (including benchmark revisions) are likely to result in a less bullish backward-looking picture of the labour market. Indeed, the preliminary benchmark revisions showed that the March 2019 level of payroll employment will be revised down by about 500,000 or 0.3%. This means that in the 12 months to March 2019 average monthly employment growth will be revised down to about 170,000, down from a previously reported figure of 210,000. That said, job growth should remain above the level required to absorb the number of people entering the labour force – about 100,000 a month. As such, the unemployment rate should remain low. In addition, initial jobless claims have stabilised at low levels, pointing to a similar development in the u-rate in the next months. Consensus expectations suggest that the unemployment rate will be unchanged in January at 3.5%, a multi-decade low. Meanwhile, wage inflation should be little changed at about 3%, well contained from a historical perspective and likely reflecting the impact of structural factors on price pressures and wages. Other US releases to pay attention to next week include the ISM surveys, car sales and weekly claims. The manufacturing ISM index is expected to edge up to 48.5 in January from 47.2 in the previous month. The manufacturing sector is still in the doldrums, but the outlook has improved thanks to the US-China trade truce and a gradual improvement in external demand.