FRANCE DATA: Employment Prospects Soft; Q1 Wage Pressures Ease
French employment prospects remain soft. Private sector payrolled employment was flat in Q1, according to preliminary estimates, while annual growth was -0.3% Y/Y (vs -0.1% prior). This softening in employment is consistent with recent falls in the EC’s Expected Employment Indicator, which has broadly been seen across industries.
- Employment references from the April PMI round were also weak:
- Services: “The latest survey data revealed there was a further trimming of employment across the French service sector in April. The nonreplacement of leavers was a common method through which workforce capacity was lowered, according to panel member reports. In some cases, firms cited recruitment difficulties. The pace at which jobs were shed was moderate overall”.
- Manufacturing: “There was a further fall in employment, albeit one that was only marginal and the softest in almost two years”.
- Construction: “Cutbacks to employment were once again made by French construction companies during the latest survey period, extending the current job shedding sequence to precisely a year. The extent to which workforce numbers dipped was moderate overall”.
- Preliminary Q1 wages rose 0.7% Q/Q, but annual growth eased to 2.1% Y/Y (vs 2.8% prior). The Indeed wage tracker has tracked at sub-2% levels through the year.
- This softening in compensation pressures is already being reflected in core inflation measures. In the April flash round, core HICP inflation was 1.7% Y/Y (vs 1.8% prior).
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USD: /STIR: Dollar Demand In X-ccy Basis, Doubts Over USD Bounce Evident
The last couple of sessions have seen EUR/USD, GBP/USD & JPY/USD 3-month x-ccy basis move away from multi-month highs as the tariff backdrop has resulted in wider risk-off trade, an evolution from the sell the U.S. theme that had driven prior risk-off flow.
- This channel of USD demand, at least in part, reaffirms the greenback’s safe haven status, as global equity markets tumble alongside increased global growth worry.
- Still, policy uncertainty and the potential long-term shift in global trade flows means that recoveries in the broader USD remain shallow at this stage and could limit the overall USD bounce. JPY and the CHF remain the safe havens of choice in this environment.
- Accordingly, Goldman Sachs question the recent bounce in the greenback and now see the USD weakness of Q1 persisting for longer and deepening further. They warn that “with such broad, unilateral tariffs there is less incentive for foreign producers to provide any accommodation - U.S. businesses and consumers become the price-takers, and it is the USD that needs to weaken to adjust if supply chains and/or consumers are relatively inelastic in the short term.”
Fig. 1: EUR/USD, GBP/USD & JPY/USD 3-month X-ccy Basis
Source: MNI - Market News/Bloomberg
MACRO ANALYSIS: MNI US Employment Insight: Solid But ‘Stale’
We have published and e-mailed to subscribers the MNI US Employment Insight.
Please find the full report including MNI analysis and summary views from sellside analysts here: https://media.marketnews.com/US_Employment_Report_Apr2025_03f502392c.pdf
Trump administration officials dismissing recession fears over the weekend has seen 18bp of cuts priced for the next FOMC decision in May although most analysts see a Fed May cut as unlikely.
EU: German Econ Min-EU In 'Strong Position' To Respond To US Tariffs
Speaking ahead of a meeting of the Foreign Affairs Council on trade, German Economy Minister Robert Habeck says that the US' "Talks of reciprocal tariffs are simply false". Calls the White House's method of calculating tariffs "nonsense". Says the EU "is in a strong position to respond to US tariffs...[the EU] must respond calmly and firmly...Europe must not let itself be divided...Strength comes from unity."
- Habeck says that "It is about avoiding a tariff war", before claiming that the "Americans are in a weak position". Says that the EU "could increase pressure" on the US pharmaceuticals sector as part of a response. Habeck: "European countries can't solve this problem on their own."
- Sweden's Trade Minister Benjamin Dousa says on his arrival that "We don't want a trade war with the US. We want more trade and cooperation with the US. But EU stands united right now. We're in favor of a negotiated solution, but of course, stands ready for countermeasures that are well-targeted and proportionate"
- Latvia's Vice Foreign Minsiter comes out against hitting US services: "I don't think we should target [US] services - these countermeasures should be probably leveled [on] goods, but once again, we need to find positive agenda, to show our partners we can find common ground and not start new wars and battlefields."
- Livestream of doorstep comments can be found here.
