US employers may have eased hiring while wage growth moderated in June, another positive development for Jerome Powell and his colleagues at the Fed as they seek further confirmation that inflation is slowing.
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(Bloomberg) — U.S. employers likely eased hiring while wage growth slowed in June, another helpful development for Federal Reserve Chairman Jerome Powell and his colleagues as they seek more assurance that inflation is slowing.
Payrolls in the world’s largest economy are expected to rise by about 190,000 jobs, according to a Bloomberg survey of economists ahead of Friday’s report. This is a step down from the surprisingly strong gain of 272,000 in May. The unemployment rate is likely to reach 4%.
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Average hourly earnings are expected to rise 3.9% from June of last year, the smallest annual advance in three years.
Recent data, including a decline in the number of job openings and a rise in weekly unemployment claims, confirm that demand for labor is cold, although resilient. Having a greater number of workers available to choose from helps companies roll back the sharp wage increases that have been a source of inflationary pressures over the past few years.
The closely watched jobs report will appear days after Tuesday’s panel in Portugal, which includes Fed Chair Powell. Investors will be watching his comments for clues about when the US central bank might start cutting interest rates. Christine Lagarde, Powell’s eurozone counterpart, will be a panelist at the ECB’s annual forum in Sintra.
Despite the halt in economic activity in the United States, the labor market remains healthy, allowing consumer spending and the broader economy to continue functioning despite higher borrowing costs.
Another key report for the upcoming holiday week in the United States is expected to show a further decline in job openings, suggesting that companies are having more success in providing jobs. Openings for May are expected to fall below 8 million for the first time since early 2021.
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What does Bloomberg Economics say…
“We had expected to see increasing signs that monetary policy, with its long lag, was having an impact on the economy. Next week’s data is expected to provide further evidence.”
—Estelle Au, Stuart Ball, Eliza Wenger, Anna Wong and Chris J. Collins, economists. To see the full analysis, click here
In Canada, the June Labour Force Survey will provide insight into the labour market, which has failed to keep pace with massive population growth but has still posted above-average wage gains. We’ll also take a look at the country’s international trade balance.
Elsewhere, the second half of 2024 will start with a busy week. Chinese business survey data and Eurozone inflation are among the highlights, and elections in France and the UK will also focus on investors.
Click here to see what happened last week, and here’s our summary of what’s coming in the global economy.
Asia
It’s a big week for buying manager indexes. China’s official PMIs due for release on Sunday are expected to show activity flat in June, while the next day’s Caixin manufacturing PMI could decline.
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Other Caixin PMIs will be published later in the week, along with PMIs for Indonesia, South Korea, Myanmar, Philippines, Malaysia, Thailand, Taiwan, Vietnam and Singapore.
In other data, the Bank of Japan’s Tankan survey is expected to show business sentiment broadly flat in the second quarter, with the index for large service sector companies falling from a three-decade high in the previous period. Capital spending forecasts for this fiscal year are expected to rise to double digits.
Later in the week, Japanese household spending data could show spending rose in May, a result that would keep the Bank of Japan on track to raise interest rates as early as July.
Trade data is due in Australia and South Korea, while inflation reports are due in South Korea, Indonesia, Pakistan, Thailand, Taiwan and the Philippines.
Among central banks, the minutes from the Reserve Bank of Australia’s June meeting are expected to attract a lot of attention on Tuesday after Governor Michelle Bullock said the board discussed raising interest rates at that meeting.
- For more information, read Bloomberg Economics’ full report on next week in Asia
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Europe, Middle East and Africa
Politics will dominate the region, with crucial elections in the UK and France set to usher in new governments and potentially change the tone of economic policy in each country.
Britons go to the polls on Thursday, as voters prepare to oust the ruling Conservative Party after 14 years. The burning question for the UK is how long Labour majority leader Keir Starmer will be able to lead in parliament.
In France, the first round of voting for the National Assembly is on Sunday, with a runoff a week later. Early results on Monday suggest the level of support for Marine Le Pen’s far-right National Rally party could prompt a market reaction.
The results of the first round could cast a shadow over the European Central Bank’s annual retreat in the Portuguese resort of Sintra, where officials meet to discuss economic issues. The event will begin on Monday with a speech by Lagarde.
Eurozone officials in Sintra will be focusing on the latest eurozone inflation reading, also due on Tuesday, following Germany’s report on Monday. Economists expect a slight slowdown in both headline and core price growth after the setback in May.
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The European Central Bank is also due to release its latest policy decision on Thursday, a day after the Riksbank releases the minutes of its June 27 meeting.
Other national data in the euro zone could focus investors’ attention. Industrial production data from Germany and France on Friday, both for May, will point to manufacturing strength in the middle of the second quarter in the bloc’s two largest economies.
Switzerland will also release inflation data. That report on Thursday will show whether consumer price growth will remain well below the central bank’s 2% target — the benign backdrop that allowed policymakers to cut interest rates earlier this month.
Heading east, there are some monetary policy decisions among the highlights. Poland’s central bank is likely to hold borrowing costs steady on Wednesday as concerns about rapid wage growth outweigh worries about a patchy economic recovery.
On Friday, the Romanian Central Bank may make a long-awaited interest rate cut after inflation – the highest in the European Union – slowed more than expected. The first cut in more than three years will come after a surprise suspension in June, when officials remained cautious amid a ballooning budget deficit and rising demands for wages.
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Looking south, Turkey’s consumer price growth is expected to finally slow on Wednesday after more than a year of aggressive interest rate hikes. Analysts expect inflation to ease to 72.6% from 75.5% in May. The central bank aims to bring that rate below 40% by the end of the year, a target that most Turks and many foreign investors doubt is achievable.
On Friday, the South African Bureau of Economic Research will publish a survey of inflation expectations for the second quarter. The central bank will be monitoring this survey closely, as it uses such measures spanning two years to inform its decision-making. Officials said at the latest policy meeting that they were concerned about rising inflation expectations.
- For more, read next week’s full Bloomberg Economics EMEA report
latin america
The new month kicks off with central bank surveys of economists in Brazil and Mexico, while Chile publishes May GDP readings and Peru publishes its capital’s June inflation report.
Economic activity and demand are on the rise in Chile, while the consumer price report in Lima may confirm the persistence of core inflation that prompted the central bank to abruptly halt interest rates on June 13.
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In Colombia, the Central Bank on Thursday publishes the minutes of its June 28 monetary policy meeting, at which BanRep’s board of directors – led by Governor Leonardo Vilar – decided to reduce borrowing costs to 11.25% while cutting interest rates for the fifth time in a row.
Economists surveyed by the central bank expect another 275 basis points of easing in 2024, with inflation slowing to 5.7% by the end of the year.
In Brazil, President Luiz Inacio Lula da Silva’s second term as president has pulled the industry out of long-standing disarray, but the sector is still far from its former glory. May data are likely to confirm the impact of difficult financial conditions and weak demand.
In a light week for Argentina, the highlight will be the central bank’s poll of local economists. While monthly inflation has returned to single digits, economists believe that the current pace of monthly readings constitutes a minimum in the near term.
- For more, read the full week on Latin America from Bloomberg Economics.
– With assistance from Robert Jameson, Piotr Skolimowski, William Horrobin, Laura Dillon Kane, Paul Wallace, and Monique Vanek.
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