Key Events This Week: Payrolls, PMIs, Pandemics And Biden’s Latest Stimulus

Looking at the main events this week, the spotlight will as usual remain on the pandemic as investors are becoming increasingly worried at the rising number of cases in multiple regions, which in turn is raising the prospect of further restrictions and limits on economic activity. As DB’s Jim Reid writes, Europe in particular is facing a potential 3rd wave driven by the new variants, and over the last week we saw the German lockdown extended until April 18 (albeit with a U-turn over the Easter weekend restrictions), more French regions placed under lockdown, and a number of Eastern European countries also moving to toughen up restrictions. 

The coming days could see further measures announced, with German Chancellor Merkel saying in an interview last night that she could use federal law to take control of the pandemic response from the states. And this isn’t just affecting Europe either, with the Australian city of Brisbane announcing a 3-day lockdown from 5pm local time today due to an outbreak of the UK strain. The newsflow from Europe lately has shown a markedly different situation to the US, which is significantly outpacing the continent in terms of the vaccine rollout, while President Biden last week announced a new goal of 200m vaccine doses in the US within his first 100 days. 

By the close on Friday the gap between yields on 10yr US Treasuries and German bunds stood at their widest level in more than a year, with a spread of 202bps. More broadly, Covid-19 jitters have been evident elsewhere in financial markets, with oil prices down from their peak at the start of the month in part due to fears of weakening economic demand, whilst the STOXX Travel & Leisure Index in Europe is down by more than 3% since its peak less than 2 weeks ago.

In the US, the main highlight this week will be on Wednesday, when President Biden is due to deliver a speech unveiling his new infrastructure plan, as part of his “Build Back Better” agenda. We’re obviously yet to get the full details on the exact size and composition of the plan, but multiple outlets have reported that it will be in the $3tn range, with part of the cost offset via tax increases. In terms of what measures to expect, his campaign plans included a lot of emphasis on sustainability and the transition to a greener economy, while the tax measures he outlined included raising the corporate tax rate from 21% to 28%, along with higher income taxes on those earning more than $400,000. After that, the next step will be to turn the proposals into legislation, but as our US economists wrote in the world outlook, such a plan won’t win sufficient support from Republicans, so will need to go through the reconciliation process that allows legislation to pass the Senate with just a simple majority. This is what happened with the $1.9tn American Rescue Plan that Biden signed earlier this month, and they expect it to be passed along party lines in late summer or Q4.

Staying on the US, this Friday will also see the release of the March jobs report, where DB’s economists are expecting a blistering +800k increase in nonfarm payrolls as many states reopen or scale back lockdown measures, and this would be the strongest monthly job growth since August (whisper numbers are north of 1 million). Furthermore, the unemployment rate is expected to fall to a post-pandemic low of 6.0%. This would come against the backdrop of some decent labor market data out of the US recently, with the weekly initial jobless claims for the week through March 20 falling to a post-pandemic low of 684k. Nevertheless, even if the +800k growth in nonfarm payrolls were realized, that would still leave the total number of nonfarm payrolls more than 8.6m beneath its pre-Covid-19 pandemic peak, and this shortfall is something that Fed Chair Powell has been emphasizing, which just shows the distance there’s still to go before the economic damage from the pandemic is repaired.

Elsewhere, the main data highlight will likely be the release of the manufacturing PMIs from around the world on. Thursday. The flash releases we’ve already seen have been incredibly strong, with the numbers for both Germany (66.6) and the Euro Area (62.4) coming in at all-time highs, while the US was also at a decent 59.0. An interesting question will be whether the strength in the price gauges we saw in the flash PMIs will be reflected in other countries too, since that would add further support to the idea that inflationary pressures are building in multiple regions. The other data release of note from Europe will be the March flash inflation prints, with the Euro Area number coming out on Wednesday. Our European economists expect headline HICP to pick up to +1.4% yoy, and core inflation to rise to +1.2%.

Courtesy of Deutsche Bank, here is a day by day week ahead calendar

Monday March 29

• Data: UK February mortgage approvals, M4 money supply, consumer credit, US March Dallas Fed manufacturing activity
• Central Banks: Fed’s Waller speaks

Tuesday March 30

• Data: Japan February jobless rate, retail sales, France March consumer confidence, Euro Area final March consumer confidence, Germany preliminary March CPI, US January FHFA house price index, March Conference Board consumer confidence
• Central Banks: Fed’s Quarles and Williams speak

Wednesday March 31

• Data: Japan preliminary February industrial production, February housing starts, China March non-manufacturing PMI, manufacturing PMI, composite PMI, UK final Q4 GDP, France and Italy preliminary March CPI, Euro Area March CPI estimate, Germany March unemployment, US March ADP employment change, MNI Chicago PMI, February pending home sales, Canada January GDP, Australia final March manufacturing PMI (23:00 UK time)
• Central Banks: ECB’s Villeroy speaks
• Politics: US President Biden to outline infrastructure plan

Thursday April 1

• Data: March manufacturing PMIs from South Korea, Indonesia, Japan, China, Russia, Turkey, Italy, France, Germany, Euro Area, UK, South Africa, Brazil, Canada and US, Japan March vehicle sales, US weekly initial jobless claims, February construction spending, US March ISM manufacturing
• Central Banks: Fed’s Harker speaks

Friday April 2

• Data: Japan March monetary base, US March change in nonfarm payrolls, unemployment rate, average hourly earnings
• Other: Financial markets closed in multiple countries for Good Friday

 

Finally, looking at just the US, Goldman writes that the key economic data releases this week are the ISM manufacturing and jobless claims reports on Thursday, and the March employment report on Friday. There are numerous speaking engagements from Fed officials this week.

Monday, March 29

• 10:30 AM Dallas Fed manufacturing index, March (consensus 14.5, last 17.2)
• 11:00 AM Fed Governor Waller (FOMC voter) speaks: Fed Governor Christopher Waller will take part in a virtual discussion on Fed independence hosted by the Peterson Institute for International Economics. Text and moderated Q&A are expected.

Tuesday, March 30

• 09:00 AM FHFA house price index, January (consensus +1.2%, last +1.1%)
• 09:00 AM S&P/Case-Shiller 20-city home price index, January (GS +1.3%, consensus +1.2%, last +1.25%): We estimate the S&P/Case-Shiller 20-city home price index rose by 1.3% in January, following a 1.25% increase in December.
• 09:00 AM Fed Vice Chair Quarles (FOMC voter) speaks: Fed Vice Chair for Supervision Randal Quarles will take part in a virtual discussion on the Financial Stability Board hosted by the Peterson Institute for International Economics. Text and moderated Q&A are expected.
• 10:00 AM Conference Board consumer confidence, March (GS 97.5, consensus 96.8, last 91.3): We estimate that the Conference Board consumer confidence index increased by 6.2pt to 97.5 in March. Our forecast reflects stronger signals from other consumer confidence measures.
• 02:30 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will participate in a moderated discussion on “The Role Small Business Plays in Building Financial Resilience for the 50+.”

Wednesday, March 31

• 08:15 AM ADP employment report, March (GS +575k, consensus +550k, last +117k):  We expect a 575k rise in March ADP payroll employment, reflecting strong underlying job growth and a boost from lower initial jobless claims. That said, we note the possibility that ADP underperforms the BLS payroll measure this month, because workers returning to their previous employers may not be fully captured by the ADP panel methodology.
• 09:45 AM Chicago PMI, March (GS 61.0, consensus 60.0, last 59.5): We estimate that the Chicago PMI increased by 1.5pt to 61.0 in March, reflecting improvement in other manufacturing surveys and a continued boost from the supplier deliveries component.
• 10:00 AM Pending home sales, February (GS -5.0%, consensus -2.9%, last -2.8%): We estimate that pending home sales declined by 5.0% in February.

Thursday, April 1

• 08:30 AM Initial jobless claims, week ended March 27 (GS 690k, consensus 680k, last 684k); Continuing jobless claims, week ended March 20 (consensus 3,775k, last 3,870k): We estimate initial jobless claims increased to 690k in the week ended March 27.
• 09:45 AM Markit manufacturing PMI, March final (consensus 59.0, last 59.0)
• 10:00 AM Construction spending, February (GS -0.5%, consensus -1.0%, last +1.7%): We estimate a 0.5% decrease in construction spending in February following several months of solid gains, largely reflecting weakness in residential construction spending as a result of February’s winter storms.
• 10:00 AM ISM manufacturing index, March (GS 62.0, consensus 61.4, last 60.8): We expect the ISM manufacturing index to rise by 1.2pt to 62.0 in the March report, reflecting strength in the regional manufacturing surveys and a continued boost from the supplier deliveries component. Our manufacturing survey tracker rose by 2.6pt to 61.4.
• 01:00 PM Philadelphia Fed President Harker (FOMC non-voter) speaks: Philadelphia Fed President Patrick Harker will speak at a virtual Fintech symposium. Text and Q&A are expected.
• 5:00 PM Wards Total Vehicle Sales, March (GS 16.5m, consensus 16.4m, last 15.67m)

Friday, April 2

• 08:30 AM Nonfarm payroll employment, March (GS +775k, consensus +643k, last +379k); Private payroll employment, March (GS +750k, consensus +635k, last +465k); Average hourly earnings (mom), March (GS +0.1%, consensus +0.1%, last +0.2%); Average hourly earnings (yoy), March (GS +4.5%, consensus +4.5%, last +5.3%); Unemployment rate, March (GS 5.9%, consensus 6.0%, last 6.2%): We estimate nonfarm payrolls rose 775k in March. Falling infection rates and a net easing of business restrictions likely supported job growth in virus-sensitive industries—particularly leisure and hospitality—and Big Data signals generally indicate strong employment gains. A favorable swing in the weather is also likely to support payroll growth in the construction sector and other weather-sensitive industries (following weakness in February). We estimate a three-tenth decline in the unemployment rate to 5.9%, reflecting a strong expected gain in household employment. That being said, we believe a vaccine- and reopening-related rebound in labor force participation is more likely than not, and this could limit any decline in the jobless rate. We estimate a 0.1% increase in average hourly earnings (mom sa) due to negative calendar effects and negative composition effects.
• 12:00 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will take part in a NBER panel discussion on inequality and discrimination and the financial system.

Source: DB, Goldman, BofA