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U.S. Jobs Recovery Cools in Shadow of Delta Variant: Eco Week - Financial Post

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A likely moderation in U.S. hiring in the monthly employment report on Friday will give policy makers a measure of the health of the labor market and the threat posed by the delta variant of the coronavirus. 

The U.S. probably added 750,000 jobs in August, a slowdown from June and July but well above the pace seen earlier this year, according to the median of economists’ forecasts. 

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The outcome will inform Federal Reserve officials gauging the economy as they look to wind down stimulus later this year. Fed Chair Jerome Powell, acknowledging that a taper in bond purchases may be warranted, said last week that the delta variant “remains a near-term risk,” though prospects toward maximum employment are good.

“The intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the delta variant,” he said during a virtual speech at the Kansas City Fed’s annual Jackson Hole symposium. “We will be carefully assessing incoming data and the evolving risks.”

While job growth has been improving, labor-force participation — the share of Americans either working or looking for work — has been stuck near the lowest level since the 1970s for nearly a year.

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Forecasters had expected that high vaccination rates and the reopening of schools would help bring workers back into the labor force this fall, but the rapidly spreading delta variant could shift that outlook as health concerns grow and some schools delay in-person instruction.

Ahead of the jobs report, private payrolls data from the ADP Research Institute on Wednesday could give an indication of the pace of hiring. The week will also bring data on pending home sales and manufacturing.

What Bloomberg Economics Says:

“Provided job growth looks strong enough, Fed officials may discount growing signs of weaker third-quarter momentum — particularly on the consumer spending side. That puts emphasis on the August ISM manufacturing index and vehicle sales, consumer confidence, and the ISM services index to flesh out whether it is supply-side problems holding back growth or more worrying demand-side troubles.”

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–Andrew Husby and Eliza Winger. For full analysis, click here

Elsewhere, a likely spike in euro-zone inflation, gross domestic product reports in Canada, Australia and India, and a possible interest-rate increase in Chile will all feature among the other big economic reports in the next days.

Click here for what happened last week and below is our wrap of what else is coming up in the global economy.

Asia

The latest production and retail sales figures from Japan will show how the economy was faring in July as a resurgence in virus cases to record levels piled pressure on policy makers to restart and extend a state of emergency. Bank of Japan Deputy Governor Masazumi Wakatabe and board member Goushi Kataoka will give their takes on the economic and policy outlook following Powell’s Jackson Hole speech. 

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Trade figures from South Korea could give further backing to the Bank of Korea’s view that the economy has enough strength to withstand higher rates and the latest wave of Covid-19. Vietnam’s trade deficit stood at $1.3 billion in August, according to data published Sunday.

GDP figures from Australia will give a snapshot of the strength of the economy before the onset of extended lockdowns. 

China’s purchasing managers indexes will be closely watched on Tuesday amid signs the recovery there is losing steam, while reports from across the region on Wednesday will show how the spreading delta variant and supply chain snarls are affecting sentiment. 

India’s second quarter GDP numbers are set to surge from a year earlier, when Covid lockdowns slammed the brakes on the economy.

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For more, read Bloomberg Economics’ full Week Ahead for Asia

Europe, Middle East, Africa

The euro zone saw its fastest inflation since 2012 this month with a reading of 2.7%, according to the median forecast of economists, as supply bottlenecks and loosened lockdowns stoked prices. Meanwhile the strengthening recovery is likely to have pushed unemployment to a full percentage point below its crisis peak of 8.6% seen last year. 

Those statistics on Tuesday and Wednesday will focus the minds of European Central Bank policy makers who are trying to assess the quality of the rebound from the pandemic and the sustainability of inflation, as they prepare for a significant monetary decision the following Thursday on whether to keep up an elevated pace of stimulus. 

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With the coming days marking the final moment for officials to share their views before a pre-meeting quiet period, investors may pay closer attention to such comments not least in the aftermath of Powell’s speech. The central bank governors of Germany, the Netherlands and Austria are all due to make public appearances. 

In Sweden, Riksbank’s Governor Stefan Ingves and Deputy Governor Martin Floden will address the state of monetary policy in the biggest Nordic economy in separate events. Denmark meanwhile may publish its budget proposal for 2022 along with new economic forecasts. 

Further afield, Turkey reports August inflation on Friday, an indicator that will be a key determinant of the next monetary policy decision on Sept. 23. President Recep Tayyip Erdogan has pledged slower price gains and lower interest rates, and the headline rate may decelerate after the government announced a tax cut on cars. 

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On Tuesday, Uganda is expected to report that core inflation accelerated while remaining below the central bank’s medium-term target of 5%. The next day, Zambia’s central bank is expected to leave rates unchanged to aid the economy’s recovery, with inflation is forecast to slow after the kwacha’s world-beating streak helped bring down import costs.

For more, read Bloomberg Economics’ full Week Ahead for EMEA

Latin America

Staring off the week in Brazil, look for some slowing in the August reading of the country’s broadest measure of inflation, while national unemployment likely remains near record highs.

Chile on Tuesday unleashes its end-of-month data torrent — industrial output, copper production, unemployment, retail sales and manufacturing — ahead of the central bank’s monthly meeting. A rapidly heating economy and over-target inflation has analysts expecting at least a quarter-point increase here to push the key rate up to 1%. 

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In Mexico, the central bank’s quarterly inflation report is keenly awaited, especially after the surprisingly dovish minutes of the bank’s Aug. 12 meeting appeared to put a rate pause on the table. 

On Wednesday, Lima, Peru’s August consumer price report, Brazil monthly trade and Chile’s GDP-proxy data bookend Brazil’s second-quarter output report, which should reveal some loss of momentum from the previous quarter even as the year-on-year result represents a record high.

On Thursday, Brazil releases July industrial production data before Colombia then posts its August consumer price report, with analysts expecting inflation to have pushed above the target range to 4.2%.

For more, read Bloomberg Economics’ full Week Ahead for Latin America

©2021 Bloomberg L.P.

Bloomberg.com

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