Finance
US jobs data will help the Fed gauge the extent of its moderation
(Bloomberg) — Upcoming U.S. labor market data, including the monthly payrolls report, will give Federal Reserve policymakers insight into the need for further rate cuts after an almost certain cut in just over two weeks.
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With inflation slowing — though still outpacing the Fed’s target — Chairman Jerome Powell has telegraphed a September rate cut and said officials “do not seek or welcome” further cooling in the labor market. Weeks earlier, government figures showed lower-than-expected job growth in July and the highest unemployment rate in almost three years.
This Friday, the August jobs report is expected to show that payrolls in the world’s largest economy rose by about 165,000, based on the average estimate in a Bloomberg survey of economists.
While average wage growth in July would be above the modest increase of 114,000 in July, average wage growth over the past three months would slow to just over 150,000 – the smallest since early 2021. The unemployment rate is likely to have fallen from 4.3 in August % to 4.2%. .
Two days before the Friday report, the government will release figures for vacancies in July. The number of vacancies, a measure of labor demand, fell to a three-month low of 8.1 million – just above the low in more than three years.
The number of vacancies per unemployed worker, a ratio the Fed is closely watching, is currently 1.2, similar to pre-pandemic levels and a sign that labor demand is roughly in line with supply . At its peak in 2022, the ratio was 2 to 1.
Also included in the vacancy report is data on layoffs and layoffs. Any big increase could heighten Fed officials’ concerns about a weakening labor market.
Other labor-related reports in the upcoming holiday-shortened week include weekly unemployment claims and the ADP Research Institute’s August snapshot of private payrolls. In addition, the Fed will release its Beige Book on regional economic conditions, while the Institute for Supply Management reports purchasing managers’ indexes for the manufacturing and services sectors.
What Bloomberg Economics says:
“Nonfarm payrolls are likely to improve after July’s disappointing numbers – but the downward revision of 818,000 in the BLS’ early estimate for the March 2024 benchmark period likely leaves Fed officials less willing to make the first prints to be taken for granted.”
– Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins, economists. For a full analysis, click here
Elsewhere, the Bank of Canada is widely expected to make a third straight rate cut as inflation within target ranges all year allows officials to shift focus to labor market weakness.
Purchasing manager indexes from across Asia, German industrial figures and Brazil’s gross domestic product are among other highlights.
Click here for what happened last week, and below is our summary of what’s going to happen in the global economy.
Asia
Asia starts the week with a flurry of manufacturing PMI data in August – including from Indonesia, South Korea, Malaysia, Thailand, Taiwan and the Philippines – following this weekend’s official Chinese figures.
China’s Caixin Manufacturing PMI was also released on Monday and is expected to show a return to expansion after dipping below 50 in July.
Japan will receive a report on second-quarter business performance on Monday. Capital investment may recover somewhat after a decline in the three months to March, data that will contribute to revised economic growth figures the following week.
In Australia, the focus is on current account figures, which are also likely to influence gross domestic product data. These figures, which will be released on Wednesday, are expected to show that economic growth has accelerated slightly compared to the previous quarter.
South Korea will revise its second-quarter GDP the next day, and the region will also see a series of inflation updates. August trade data – released on Sunday – showed export growth returned to a double-digit decline, a result that bodes well for the economic outlook and reflects the resilience of global demand for technology products.
Consumer price growth in Vietnam could slow below 4% for the first time since March, while consumer price data also comes from South Korea, Thailand, Taiwan, Indonesia and the Philippines. Trade statistics will be published in Australia, Vietnam and Pakistan.
Among central banks, Malaysia will set its overnight policy rate on Thursday and Reserve Bank of Australia Governor Michele Bullock will give a speech the same day.
Europe, Middle East, Africa
Eurozone policymakers have until the end of the match on Wednesday to comment, before a blackout period ahead of their September 12 decision.
With inflation at its lowest level in three years, a second rate cut as part of the new easing cycle appears increasingly likely. Those present will include the heads of central banks from Germany and France.
The dates calendar is relatively light, with Germany likely to be a highlight. Factory orders on Wednesday and industrial production the next day will reveal the state of the country’s struggling manufacturers as the third quarter begins.
Among the regional reports on the agenda will be a second reading of the eurozone’s GDP measure for the three months to June.
Britain is also likely to remain quiet, with the latest August manufacturing and services Purchasing Managers Index results due on Monday and Wednesday respectively.
Data on consumer prices in Switzerland could attract attention ahead of the Swiss National Bank’s interest rate decision later this month. Inflation could remain stuck at 1.3% for a third month, well below the 2% ceiling for policymakers.
To the east, in Poland – where data from August 30 showed the fastest inflation so far this year – the central bank is widely expected to keep its key rate unchanged at 5.75% on Wednesday. Governor Adam Glapinski will speak at a news conference the next day.
Data from South Africa is likely to show on Tuesday that the continent’s most industrialized economy has survived the recession. Analysts expect the economy to have grown 0.5% in the second quarter, after contracting 0.1% in the previous three months, helped by improved energy supplies.
In Turkey, data is expected to show that the inflation rate fell by around 10 percentage points in August, from 62% to 52%. The central bank hopes that this percentage will fall to around 40% by the end of the year.
From Wednesday to Friday, Chinese President Xi Jinping’s African leaders will meet in Beijing for the Forum on China-Africa Cooperation, where they are expected to discuss new investment opportunities.
Egypt’s central bank is widely expected to maintain its key interest rate at 27.5% on Thursday. However, some analysts believe the country may choose to begin the easing process now, given the steady decline in price pressures over the past year.
Latin America
Brazil will report second-quarter economic growth figures on Tuesday that are likely to reinforce demand’s shake-off of the effects of tight monetary policy.
GDP is expected to rise 0.9% quarter-on-quarter, more than in the first three months of the year, as a tight labor market and strong consumption boost activity.
The release is likely to give a boost to left-wing President Luiz Inacio Lula da Silva, who has increased government spending while pledging to improve the living standards of ordinary citizens in Latin America’s largest economy. It could put further pressure on the central bank to raise interest rates as early as September.
The coming week will be crucial for the release of economic data in Chile. On Tuesday, the country’s central bank is likely to cut its key rate by a quarter of a percentage point to 5.5% after pausing the easing cycle at its previous meeting.
The next day, Chile’s central bankers will release their quarterly monetary policy report, with updated estimates on economic growth, inflation and the future path for borrowing costs.
On Friday, the government will report August consumer price data, which is expected to show inflation accelerating further above the 3% target due to a series of electricity tariff increases.
–With help from Matthew Malinowski, Piotr Skolimowski, Laura Dhillon Kane, Brian Fowler and Monique Vanek.
(Updates on South Korean trade in Asia)
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