Will US jobs figures continue their upward trajectory?

Will US jobs figures continue their upward trajectory?

US employment has been pushing higher every month since the beginning of the year, fuelled by an uptick in travel, leisure and other previously curtailed activities as pandemic restrictions have eased.

Investors will find out whether this upward trend has continued on Friday, when the US labour department releases its non-farm payroll data for April. March data marked a sharp improvement from the previous month, but many economists surveyed by Bloomberg are optimistic that the number of new jobs will climb yet again.

For April, analysts on average are expecting that 991,000 new jobs were added, with the median number hovering around 950,000. In March, the US economy gained 916,000 non-farming jobs, the highest month-on-month increase since August last year.

The US unemployment rate, released with non-farm payrolls, has also steadily declined, landing at 6 per cent in March. The two labour department data points are the most closely watched indicators of the strength of the US reopening.

For April, economists polled by Bloomberg expect the unemployment rate to drop to 5.8 per cent. While that would be the lowest level since the first US lockdowns in March last year, it would still be 2.3 percentage points higher than pre-pandemic levels.

“The reality is really clear,” said James Sweeney, chief economist at Credit Suisse. “We have many millions of jobs to go before we’re back to full employment.” Aziza Kasumov

Will an upbeat Bank of England lift the pound?

The pound has made strong gains against its peers this year, rising 2 per cent against the dollar and 3 per cent against the euro. Bolstered by the UK’s success with its vaccine rollout and a rebound in demand for sterling assets, its climb accelerated last week to within touching distance of $1.40.

Further support could come from the Bank of England at its policy meeting on Thursday if its members offer an upbeat assessment of the country’s economic recovery.

Analysts expect the central bank will announce a significant change in its £150bn bond-buying programme as the economy improves and the BoE’s Monetary Policy Committee prepares to scale back its support.

“We see a 70 per cent chance that the MPC announces a taper of its asset purchases,” said Paul Robson, head of G10 currency strategy at NatWest Markets.

Robson predicted the pound would continue its gains against the dollar and euro in the coming weeks, unless developments around Scotland’s national election spoiled the positive sterling sentiment.

“We expect the forecasts and overall tone to be more upbeat, and this can play positively for the currency,” he added.

Robert Wood, a UK economist at Bank of America, predicted that the BoE would keep interest rates unchanged and “endorse” market expectations that the central bank would raise rates twice between now and the end of 2024.

“Anecdotal evidence suggests that the partial reopening of the UK economy on April 12 has boosted consumption,” noted Rabobank analysts. Eva Szalay

How long can the palladium rally last? 

Demand for palladium, used in petrol cars’ catalytic converters to limit harmful emissions, has been boosted by tightening pollution standards in China and the EU, as well as mining supply disruptions in South Africa. Its price has surged more than 20 per cent this year, hitting a record high on Friday of $3,008 an ounce.

Whether it can maintain this level will depend on how quickly sales of electric cars displace their petrol counterparts. Electric vehicles do not require any palladium since they rely on battery rather than engine power.

While overall car sales fell 6 per cent in 2020, electric vehicle sales rose 41 per cent, according to the International Energy Agency. The silvery-white metal’s prospects could also be hurt by the fact that there are few applications for palladium in other green technologies.

Its price is likely to be supported through this year and into next by a lack of mined supply, according to analysts at HSBC. But a shift to electric vehicles and a corresponding lean towards cheaper platinum could limit gains in the longer term.

“Substitution in autos away from palladium to platinum, the threat of EV and greater supply will probably result in lower prices later this decade,” Jim Steele, an analyst at HSBC, said.

Analysts at Jefferies were more sanguine, pointing out that traditional carmakers are using a growing amount of palladium per vehicle to meet stringent environmental rules. “We see runway for palladium demand growth in [internal combustion engines] through 2030 and possibly beyond.” Henry Sanderson