(Bloomberg) — Upcoming readings on the U.S. labor market, including the monthly payrolls report, will give Federal Reserve policymakers a sense of the need for further interest rate cuts after a cut was all but certain in just over two weeks.
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Against a backdrop of slowing inflation (albeit still faster than the Fed’s target), Chairman Jerome Powell announced a rate cut in September and said policymakers “neither seek nor welcome” a further cooling of the labor market. Weeks earlier, government figures showed lower-than-expected job growth in July and the highest unemployment rate in nearly three years.
The August jobs report is expected to be released next Friday and will show payrolls in the world's largest economy rose by about 165,000, according to the median estimate in a Bloomberg survey of economists.
While up from a modest 114,000 increase in July, average payrolls growth over the most recent three months is expected to moderate to just over 150,000, the smallest since early 2021. The unemployment rate likely edged lower in August, to 4.2% from 4.3%.
Two days before Friday's report, the government will release job openings figures for July. The number of job openings, a measure of labor demand, is expected to fall to a three-month low of 8.1 million, just above a more than three-year low.
The number of job openings per unemployed worker, a ratio closely watched by the Federal Reserve, currently stands at 1.2, similar to pre-pandemic levels and a sign that demand for labor is roughly in line with supply. At its peak in 2022, the ratio was 2 to 1.
The job openings report also includes data on layoffs and terminations. Any major increase could heighten Federal Reserve officials' concerns about a weakening labor market.
Other labor-related reports due in the holiday-shortened week ahead include weekly jobless claims and the August private payrolls report from the ADP Research Institute. In addition, the Federal Reserve is to publish its Beige Book of regional economic conditions, while the Institute for Supply Management is to publish purchasing managers' indices for manufacturing and services.
What Bloomberg Economics says:
“Nonfarm payrolls are likely to improve from the disappointing July reading, but the downward revision of 818,000 to the BLS’s initial estimate for the March 2024 reference period likely leaves Fed officials less willing to take the initial figures at face value.”
— Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins, economists. For the full analysis, click here
The Bank of Canada, meanwhile, is widely expected to implement a third consecutive rate cut as inflation, which has remained within its target range all year, allows policymakers to shift focus to weakness in the labor market.
Other notable data include Asian purchasing managers' indices, German industrial figures and Brazil's gross domestic product.
Click here to see what happened over the past week, and then our summary of what's next for the global economy.
Asia
Asia starts the week with a wave of August manufacturing PMI data, including from Indonesia, South Korea, Malaysia, Thailand, Taiwan and the Philippines, following official figures from China at the weekend.
China's Caixin manufacturing PMI is also due on Monday and is expected to show a return to expansion after a dip below 50 in July.
Japan will receive a report on second-quarter corporate performance on Monday. Capital investment is expected to pick up somewhat after falling in the three months through March, data that will feed into revised economic growth figures next week.
In Australia, the focus is on current account figures, which are also likely to weigh on gross domestic product data. Those figures, due on Wednesday, are expected to show that economic growth accelerated slightly from the previous quarter.
South Korea revises its second-quarter GDP the next day, and the region also gets a flurry of inflation updates. Trade data for August, released on Sunday, showed export growth back at a double-digit pace, 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 to below 4% for the first time since March, while consumer price data will also be released in South Korea, Thailand, Taiwan, Indonesia and the Philippines. Trade statistics will be released in Australia, Vietnam and Pakistan.
Among central banks, Malaysia sets its policy rate on Thursday and Reserve Bank of Australia Governor Michele Bullock is due to give a speech the same day.
Europe, Middle East, Africa
Euro zone policymakers have until the end of trading on Wednesday to comment before a silent period takes effect ahead of their Sept. 12 decision.
With inflation now at a three-year low, a second rate cut in the new easing cycle looks increasingly likely. Among those in attendance are the heads of the central banks of Germany and France.
The data calendar is relatively light, with Germany likely to be one of the bright spots. Factory orders on Wednesday and industrial production the following day will reveal the situation for the country's struggling manufacturers at the start of the third quarter.
Among the regional reports on the agenda, a second reading of the index measuring eurozone GDP for the three months to June will be published.
The UK is likely to be similarly quiet, with final results of the August purchasing managers' indices for manufacturing and services scheduled for Monday and Wednesday respectively.
Swiss consumer price data may be in focus ahead of the Swiss National Bank's rate decision later this month. Inflation is expected to remain at 1.3% for a third month, comfortably below the 2% ceiling set by the authorities.
In Poland, where data for August 30 showed the fastest inflation so far this year, the central bank is expected to keep its key rate unchanged at 5.75% on Wednesday. Governor Adam Glapinski will speak at a news conference the following day.
South African data due on Tuesday are likely to show the continent's most industrialised economy has avoided 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 power supplies.
In Turkey, data is expected to show the inflation rate fell by about 10 percentage points in August to 52% from 62%. The central bank expects it to fall to around 40% by the end of the year.
From Wednesday to Friday, African heads of state and Chinese President Xi Jinping 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 expected to hold its main rate at 27.5% on Thursday. However, some analysts believe it may choose to start the easing process now, given the steady reduction in price pressures over the past year.
Latin America
Brazil is set to release second-quarter economic growth figures on Tuesday, likely to reinforce the view that demand is recovering from the effects of tight monetary policy.
GDP is expected to have risen 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 boost leftist President Luiz Inacio Lula da Silva, who has increased public spending while promising to improve living standards for 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.
Next 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 point, to 5.5%, after having paused the easing cycle at its previous meeting.
The following day, Chilean central bankers will publish their quarterly monetary policy report, with updated estimates on economic growth, inflation and the future path of borrowing costs.
On Friday, the government will release consumer price data for August, which is expected to show inflation accelerating further above the 3% target due to a series of increases in electricity rates.
–With assistance from Matthew Malinowski, Piotr Skolimowski, Laura Dhillon Kane, Brian Fowler and Monique Vanek.
(Update to South Korea's trade in Asia section)
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