US Labor Market Powers Ahead Amid Resilient Demand: Eco Week – BNN Bloomberg

(Bloomberg) — The last US jobs report ahead of the Federal Reserve’s September policy meeting likely showed employers continued to add jobs at a healthy — albeit more moderate — pace in August, underscoring the durability and strength of the labor market. 

Friday’s jobs report is projected to show a 300,000 payrolls increase in August, according to the median estimate in a Bloomberg survey of economists. The unemployment rate is seen holding at 3.5% — matching a five-decade low — while average hourly earnings likely posted another solid gain. 

Fed Chair Jerome Powell signaled this past week that the US central bank is likely to keep raising interest rates and leave them elevated for a while to stamp out inflation. He noted this will likely lead to a softening in labor market conditions and bring some pain to households and businesses. 

In the days ahead of jobs report, a slew of other indicators will offer additional insight into the state of the labor market. The government will release July data on vacancies and quits on Tuesday. Economists expect job openings to remain elevated in the month, indicating resilient demand for labor. 

A day later, the ADP Research Institute will release its revamped monthly report, complete with data on both employment and wages. 

Among other US economic data: the Institute for Supply Management will release its closely-watched manufacturing index for August, and the Conference Board will offer the latest look at consumer confidence. A measure of home prices in 20 US cities will also be released.

What Bloomberg Economics Says:

“We expect the pace of hiring to slow in August — but given our expectation of a stagnant labor-force participation rate, it will take very few added jobs for the unemployment rate to edge down. The strength of this report might seal the deal for the Fed to opt for another 75-basis point hike September.”

–Anna Wong, Yelena Shulyatyeva, Andrew Husby and Eliza Winger. For full analysis, click here

Elsewhere, euro-area inflation is predicted to hit another record, while China PMIs are predicted to stay weak. In Canada, second-quarter GDP will likely show the expansion losing momentum after a strong first quarter. 

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

Asia

China’s PMI readings for August on Wednesday headline Asia’s economic calendar, with intense focus on the drag caused by restrictions to stop the spread of Covid and an ongoing property slump. 

China Official PMIs

Trade-reliant South Korea’s industrial production and exports data will give the latest pulse check on the global economic slowdown. 

In Japan, industrial production and retail sales data will give clues on how well the recovery in the world’s third-largest economy is progressing. As inflation continues to creep up beyond the Bank of Japan’s target rate, board member Junko Nakagawa will give the latest thinking on policy. 

BOJ Governor Haruhiko Kuroda said Saturday in Jackson Hole that almost all of the country’s inflation is being caused by higher commodities prices and that the central bank must continue with easy monetary policy for now. 

“We have no choice other than continued monetary easing until wages and prices rise in a stable and sustainable manner,” Kuroda said. 

Australia’s retail sales and house prices data, and New Zealand’s business confidence data, will give insight on the state of both economies as rate hikes look set to continue. 

India will report GDP figures on Wednesday that will show a robust recovery in the services sector after a wider re-opening from the pandemic.

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

Europe, Middle East, Africa

Euro-area inflation takes center stage, with economists predicting it will hit 9% when August data are published Wednesday. In the run-up, the region’s top four economies also publish figures.

Those numbers may convince European Central Bank policy makers to raise borrowing costs by another sizable increase on Sept. 8. While officials have committed to hike costs again, few have indicated publicly how big a move they’d like. At least six of them — including Chief Economist Philip Lane — could provide more clarity when they speak before the central bank’s official quiet period kicks in on Thursday.

Governing Council member Olli Rehn told Bloomberg TV in Jackson Hole that the ECB must act forcefully to contain record inflation, adding that the next step will be a “significant move” in September.

The inflation situation would be exacerbated if Russian gas gets cut off permanently. Gazprom plans to close the Nord Stream pipeline for three days of maintenance starting Wednesday. There’s worry that flows may not resume after that. 

German Finance Minister Christian Lindner said in an interview published Sunday that the government needs to address soaring power prices “with the utmost urgency.” 

The Bank of England may hike by a half point when it meets in mid September. The central bank will release a survey of its own this week, likely to show that corporate decision makers expect inflation to accelerate. 

In Hungary, the central bank decides on the base and weekly interest rate, with policy makers expected to deliver hikes as inflation overshoots forecasts and the currency plummets.

Turkish trade-balance figures are expected to show a further widening of the deficit, while second-quarter economic output might be stronger than the 7.3% growth recorded in the first three months of the year.

Kenya’s statistics office is expected to announce that inflation accelerated for a sixth consecutive month in August. Prices are rising at the fastest pace in five years, which may prompt the monetary policy committee to raise interest rates when it meets next month, after unexpectedly leaving borrowing costs unchanged in July before the country held a general election.

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

Latin America

Brazil’s second-quarter output report is expected to show Latin America’s biggest economy surmounted tight fiscal conditions, double-digit borrowing costs and inflation to post modest if uneven growth.

Central bank chief Roberto Campos Neto this past week said he expects consumer prices to fall for three straight months through September, so look for Brazil’s broadest measure of inflation to have slowed in August. Industrial production in July likely shrank for a second month. 

In Mexico, the highlight of the week is Banxico’s quarterly inflation report that updates policy makers’ estimates for key indicators and a cut to their growth forecasts isn’t out of the question. The central bank also posts remittance figures for July while the statistics agency publishes labor market data.

Seven economic indicators out of Chile including GDP-proxy data, retail sales and industrial output for July are expected to turn down as Latin America’s fifth-biggest economy may be heading into a second-half recession.

After Brazil, Peru appears to be the second economy in the region now past peak inflation. Analysts expect Lima consumer price figures for August to show a second month of deceleration.

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

(Updates with Rehn, Lindner in EMEA section.)

©2022 Bloomberg L.P.

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