Insights.abnamro.nl/en

Daily Insight

3 March 2016

Stronger than expected US ADP job report

ADP employment adds 214K jobs in February

The ADP employment report for February showed that private payroll growth increased

214K on the month, above consensus estimates (190K) and slightly higher than the revised

January figure of 193K. Construction continues to show some improvement, with 27K

additional jobs added, while manufacturing firms shed 9K jobs. The decline in manufacturing

is a disappointment since in January’s employment report, the manufacturing sector saw

some hiring. The service providing sector continues to show strong hiring despite the weak

nonmanufacturing surveys reported in the beginning of this year. The expansion in jobs was

driven by professional business services. The ADP report is generally an appetizer for

Friday’s nonfarm payrolls report.

ADP an appetizer for nonfarm payrolls report

‘000s

Source: Thomson Reuters Datastream

-1000

-800

-600

-400

-200

0

200

400

600

01 02 04 05 07 08 09 11 12 14 15

Nonfarm payrolls ADP

Group Economics Macro & Financial Markets Research

Maritza Cabezas

Senior Economist

Tel: +31 20 343 5618

maritza.cabezas@nl.abnamro.com

US ADP employment adds 214K jobs in February

Nonfarm payrolls on Friday to show some improvement compared to January

Slower economic activity and weaker profits in the US will likely result in

more moderate employment growth, but no recession

2 Daily Insight – ADP stronger than expected US job report- 3 March 2016

Nonfarm payrolls on Friday to show some improvement compared to January

The ADP report suggests there could be a firming of nonfarm payroll growth on Friday. We

look for an increase of 165K in the private nonfarm payrolls and unemployment remaining at

4.9%. This is an increase compared to the 158K reported in January, but it is below

consensus.

Slower economic activity will likely result in more moderate employment growth

Indeed, we expect job gains to slow down a bit throughout the year compared to 2015. We

expect firms to start economising on labour as the job market continues to tighten. The

combination of subdued productivity gains and rising wage growth will likely squeeze profit

margins. These are still at high levels though, suggesting that there is room for some

compression without having a large impact on employment growth.

However, slower labour growth would not point to a recession

A slower job labour growth scenario does not point to a recession in the coming year.

Indeed, almost all labour market indicators are far from levels that have been reported

before recessions. In fact, in the past nonfarm payrolls at similar levels than today’s have

enforced economic expansions.

3 Daily Insight – ADP stronger than expected US job report- 3 March 2016

Find out more about Group Economics at: https://insights.abnamro.nl/en/

DISCLAIMER ABN AMRO Bank Gustav Mahlerlaan 10 (visiting address) P.O. Box 283 1000 EA Amsterdam The Netherlands This document has been prepared by ABN AMRO. It is solely intended to provide financial and general information on economics. The information in this document is strictly proprietary and is being supplied to you solely for your information. It may not (in whole or in part) be reproduced, distributed or passed to a third party or used for any other purposes than stated above. This document is informative in nature and does not constitute an offer of securities to the public, nor a solicitation to make such an offer. No reliance may be placed for any purposes whatsoever on the information, opinions, forecasts and assumptions contained in the document or on its completeness, accuracy or fairness. No representation or warranty, express or implied, is given by or on behalf of ABN AMRO, or any of its directors, officers, agents, affiliates, group companies, or employees as to the accuracy or completeness of the information contained in this document and no liability is accepted for any loss, arising, directly or indirectly, from any use of such information. The views and opinions expressed herein may be subject to change at any given time and ABN AMRO is under no obligation to update the information contained in this document after the date thereof. Before investing in any product of ABN AMRO Bank N.V., you should obtain information on various financial and other risks and any possible restrictions that you and your investments activities may encounter under applicable laws and regulations. If, after reading this document, you consider investing in a product, you are advised to discuss such an investment with your relationship manager or personal advisor and check whether the relevant product –considering the risks involved- is appropriate within your investment activities. The value of your investments may fluctuate. Past performance is no guarantee for future returns. ABN AMRO reserves the right to make amendments to this material. © Copyright 2016 ABN AMRO Bank N.V. and affiliated companies ("ABN AMRO").

Day Date Time Country Key Economic Indicators and Events Period Latest outcome Consensus ABN AMRO

Monday 29/02/2016 00:50:00 JP Industrial production - % mom Jan P 3.7 2.8Monday 29/02/2016 11:00:00 EC CPI - % yoy Feb -0.2 0.2 -0.2Monday 29/02/2016 15:00:00 BE GDP - % qoq 4Q F 0.3Monday 29/02/2016 15:45:00 US Chicago Fed - business confidence - index Feb 47.6 52.3 52.0Monday 29/02/2016 16:00:00 US Pending home sales - % mom Jan -2.5 0.9 0.8

Tuesday 01/03/2016 00:30:00 JP Unemployment - % Jan 3.2 3.3Tuesday 01/03/2016 02:00:00 CN PMI manufacturing - index (official) Feb 49.0 49.4Tuesday 01/03/2016 02:00:00 CN PMI non-manufacturing - index (official) Feb 52.7Tuesday 01/03/2016 02:45:00 CN PMI manufacturing - index (Caixin) Feb 48.0 48.4Tuesday 01/03/2016 09:00:00 NE PMI Feb 51.7Tuesday 01/03/2016 09:55:00 DE Unemployment - % Feb 6.20 6.20Tuesday 01/03/2016 09:55:00 DE Unemployment change - thousands Feb -10.0 -8.3Tuesday 01/03/2016 10:00:00 EC PMI manufacturing - index Feb F 51.2 51.0Tuesday 01/03/2016 10:30:00 GB PMI manufacturing - index Feb 50.8 52.0 51Tuesday 01/03/2016 11:00:00 EC Unemployment - % Jan 10.3 10.4 10.4Tuesday 01/03/2016 15:45:00 US Markit - Flash PMI Feb F 51.3 Tuesday 01/03/2016 16:00:00 US ISM manufacturing - index Feb 50 49 49

Wednesday 02/03/2016 14:15:00 US ADP nat. employment report - thousands Feb 214.0 186.4 165Wednesday 02/03/2016 BR Policy rate - % Mar 2 14.3

Thursday 03/03/2016 02:45:00 CN PMI services - index (Caixin) Feb 52.4Thursday 03/03/2016 02:45:00 CN PMI composite - index (Caixin) Feb 50.1Thursday 03/03/2016 FR Unemployment (mainland France) - % 4Q 10.2Thursday 03/03/2016 10:00:00 EC PMI services - index Feb F 53.0 53.0Thursday 03/03/2016 10:00:00 EC Composite PMI output Feb F 52.7 52.7Thursday 03/03/2016 10:30:00 GB PMI services - index Feb 55.6 55.1 54.0Thursday 03/03/2016 11:00:00 EC Retail sales - % mom Jan 0.3 0.1 0.1Thursday 03/03/2016 13:00:00 BR GDP - % yoy 4Q -4.5Thursday 03/03/2016 14:30:00 US Output per hour nonfarm business sector - % qoq 4Q F -3.0 -3.3Thursday 03/03/2016 16:00:00 US ISM non-manufacturing, index Feb 53.5 53.4 52.0

Friday 04/03/2016 14:30:00 US Change in employment private employment - thousands Feb 158.0 188.0 165Friday 04/03/2016 14:30:00 US Change in employment total - thousands Feb 151.0 198.0 175Friday 04/03/2016 14:30:00 US Unemployment - % Feb 4.9 4.9 4.9Friday 04/03/2016 14:30:00 US Trade balance - USD bn Jan -43.4 -43.4

Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected key variables and events)