US Jobs Report Is Set to Provide Some Solace to the Fed

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(Bloomberg) — U.S. employers are gradually slowing the pace of hiring and hourly earnings are falling, offering some solace to federal policymakers as they try to beat persistent inflation.

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For investors, though, economic data and monetary policy have taken a back seat to negotiations over the federal debt ceiling stretching into the final days before the US government risks a default. While lawmakers have narrowed differences, no final agreement has yet been reached.

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Government data released on Friday is expected to show that jobs in the world’s largest economy increased by less than 200,000 in May, down from average monthly job growth of about 370,000 over the past year. Earnings are expected to rise 0.3% from the previous month, when it posted its biggest advance in a year.

Another report next week is expected to show the lowest number of open positions in two years. Although job vacancies are still about 2 million higher than pre-pandemic levels, the fourth consecutive monthly decline in job openings in April should underscore the gradual easing of the cramped working conditions that helped fuel inflation over the past year.

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The latest footage of the action scene will provide Fed officials with clues about the impact of tighter credit conditions, higher interest rates, and growing economic concerns.

Policymakers meet June 13-14 to decide whether a quarter-point hike in the benchmark interest rate is warranted after data this week showed faster inflation and resilient demand at the start of the second quarter.

Fed officials are scheduled to speak next week, including regional bank presidents Thomas Parkin of Richmond and Patrick Harker of Philadelphia, along with board member Philip Jefferson.

What Bloomberg Economics says:

“May jobs data is expected to show a slowdown in the pace of hiring — but not enough to make the Fed feel comfortable. The volatility of monthly payroll data masks a gradual slowdown in the pace of hiring since late 2021 — although the cooling of the labor market has been slower than expected. expected by most analyses.

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—Anna Wong, Stuart Ball, Eliza Winger and Jonathan Church, economists. For the full analysis, click here

Further north, Statistics Canada will reveal first-quarter GDP, providing important insights into whether the economy is calm enough for the Bank of Canada to keep interest rates steady next month.

Elsewhere, data showing slowing inflation in the eurozone, polls of Chinese purchasing managers, and multiple GDP reports may attract investors’ attention.

Click here for what happened last week and below is our summary of what is going to happen in the global economy.

Asia

One of the main highlights in the region will be China PMIs. On Wednesday, economists expect the official PMI to show a slight deterioration in manufacturing, while strong growth in the non-factory measure is expected to slow.

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The Australian inflation figure for April, due on the same day, could be pivotal for RBI watchers. The median forecast expects a slight acceleration, to 6.4%, though some economists think it will stay the same or even slow.

In India, Wednesday’s first-quarter GDP data may show a recovery, as both domestic and external demand help boost growth.

Thailand’s central bank is likely to raise interest rates by a quarter point on the same day, and Sri Lankan officials are also set to make a ruling on monetary policy.

And in Japan, economists expect industrial production to increase on Wednesday for the third month in April.

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Europe, Middle East and Africa

Thursday’s latest eurozone inflation reading could attract significant attention, as the data is expected to show the European Central Bank’s frustratingly slow progress in easing price pressures.

Core consumer price growth is seen weakening to 6.3% in the 20-country currency area, while the core measure that strips out volatile items such as energy could change slightly at 5.5%. Both readings would still be well above the ECB’s 2% target.

National reports prior to that date will likely confirm variation across the region. On Tuesday, Spanish inflation is expected to slow to 3.3%, while readings in France, Italy and Germany the next day could remain above 6%.

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Central bank governors from Croatia, Austria and Italy are among European Central Bank policymakers slated to speak, and minutes from the May 4 meeting will be released on Thursday.

The latest report on the institution’s financial stability, due the day before, is also set to draw attention, not least after banking sector turmoil in the US and Switzerland.

It will be quiet in the UK, as it begins the week with a public holiday, as it is in most of Europe. Among the main events are Bank of England’s Katherine Mann’s speech on Wednesday and consumer lending data the next day.

Swiss GDP on Tuesday may show that the economy barely grew in the first quarter after stabilizing in the previous three months. That’s still respectable given the economy’s integration with that of Germany, which has been in recession.

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Swedish GDP data for the first quarter will be released on the same day, with economists not forecasting growth after declining in the previous period. The European Commission expects the country to face the worst recession in the EU in 2023.

Several Russian reports will be released on Wednesday, including Industrial Production, Weekly Inflation, Retail Sales, Wages and Unemployment.

Looking south, Türkiye releases growth data on Wednesday. The elections there will be closely watched as President Recep Tayyip Erdogan faces Kemal Kilicdaroglu in a run-off on Sunday.

Erdoğan did better than polls predicted in the first round on May 14, just below the 50% threshold needed to avoid another round of voting. Markets favor it to secure another period.

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In Africa on Monday, Kenya’s rate-setting committee is preparing to leave borrowing costs unchanged as it monitors the impact of a jumbo hike in March after inflation eased last month.

The next day, Lesotho, whose currency is pegged to the South African rand, is likely to follow suit and raise interest rates. And on Wednesday, officials from nearby Mozambique may hold the benchmark rate steady for the fourth consecutive meeting.

latin america

The minutes of the May 12 Banco Central de Chile meeting, which will be released on Monday, are likely to reflect the central finding of the statement after the decision: the sluggish pace of inflation gives policymakers no choice but to hold at 11.25% for the foreseeable future.

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The minutes of Panxico’s May 18 meeting should confirm the board’s concern that the inflationary outlook is “complex and uncertain,” so Mexico’s central bank will need to keep interest rates high – now at a record 11.25% – and stable for an extended period. a period of time.

Banquico’s quarterly inflation report published mid-week may see economic output expectations raised while inflation expectations are revised downward on the back of a stronger peso and a jump in foreign investment supported by near support.

Four of the five largest economies in the region will release unemployment data. Unemployment is on the rise again in Brazil and Chile after recovering from pre-pandemic levels, hovering near post-pandemic lows in Colombia, while it was at a record low of 2.39% in Mexico.

Latin America’s largest economy likely rebounded in the first three months of 2023 due to one-time factors such as government social payrolls and a strong harvest. Most analysts see Brazil heading for at least four years of below-average growth, posing a major challenge to President Luiz Inacio Lula da Silva’s agenda.

– With assistance from Robert Jameson, Laura Dillon Kane, Monique Vanek, and Paul Richardson.