(Bloomberg) — Friday’s US jobs report is projected to show a labor market at cruising speed in September, with more moderate but still-healthy payrolls growth that’s likely to keep the Federal Reserve pumping hard on the monetary-policy brakes.
Payrolls probably increased by about 250,000 last month, while the unemployment rate may have held at 3.7%, just above a five-decade low, according to the median estimates in a Bloomberg survey of economists.
While the advance in employment would be the smallest since the end of 2020, it would still exceed the average gain of the five years that preceded the pandemic. Such sustained demand for labor risks keeping wage growth elevated, and suggests the Fed’s efforts to ameliorate price pressures with huge interest-rate hikes have so far had a limited impact on the job market.
While resilient, jobs growth is expected to soften as the Fed continues its inflation fight, Chair Jerome Powell signaled after the central bank boosted its benchmark lending rate by 75 basis points for a third-straight meeting. Policy makers’ median projections imply another 125 basis points of tightening this year.
“I do anticipate that accomplishing price stability will require slower employment growth and a somewhat higher unemployment rate,” Boston Fed President Susan Collins said in a Sept. 26 speech. “And I take very seriously that unemployment is painful.”
A bevy of speaking engagements by Fed policy makers — including Governor Lisa Cook and regional presidents Raphael Bostic, Charles Evans, Mary Daly and John Williams — is on tap as investors assess the appetite for another 75 basis-point increase in interest rates at the central bank’s November meeting.
In addition to the monthly labor report, figures on August job openings and September surveys of manufacturing and services will be released.
What Bloomberg Economics Says:
“The deciding factor for the Fed is the labor market. Small cracks are showing, with more anecdotes from large companies telling of hiring freezes or layoffs, and rising numbers of people working part-time for economic reasons. But with job openings still at historically elevated levels, workers can find replacement jobs relatively easily. Together with falling productivity, this will put upward pressure on wages in the near term. That means the Fed will continue to hike, even into global economic weakness.”
–Anna Wong, Andrew Husby and Eliza Winger, economists. For full analysis, click here
Elsewhere, several central banks around the world may raise rates, with hikes likely as far afield as Australia and Peru. Meanwhile, major political speeches by UK Conservative Party leaders will be scrutinized for any sign of a U-turn on unfunded tax cuts.
Click here for what happened last week and below is our wrap of what’s coming up in the global economy.
The Reserve Bank of Australia is likely to raise rates by a half-percentage point for a fifth straight month on Tuesday, though hikes could be smaller going forward as inflation shows signs of slowing in response to rapid-fire rate increases.
The Reserve Bank of New Zealand is expected to follow suit the next day with its own half-percentage-point hike as the tightening cycle there gets closer to its end.
In troubled Sri Lanka, the central bank is likely to stay put for a second straight meeting after raising rates by 9.5 percentage points already this year.
In Japan, investors will be on guard for possible additional currency intervention should the yen suffer a renewed sharp slide. Tankan business confidence and Tokyo CPI data at the start of the week will show the strength of price gains in September and the impact of inflation and global recession concerns on corporate activity.
Price prints are also expected in Indonesia, Thailand, Philippines and Pakistan.
Japan’s wage data on Friday will likely indicate that growth in paychecks still lacks the strength needed to budge Bank of Japan Governor Haruhiko Kuroda on policy.
In South Korea, national CPI data is set for release on Wednesday, ahead of a central-bank decision later in the month, though recent weakness in the won may be of greater concern. China will be closed for National Day holidays for the whole week, and Malaysia will unveil its budget for the coming year.
- For more, read Bloomberg Economics’ full Week Ahead for Asia
Europe, Middle East, Africa
The UK is likely to stay in focus after Chancellor Kwasi Kwarteng’s announcement last month of tax cuts that lacked plans on how to fund them.
As in previous days, Bank of England officials’ appearances may draw scrutiny for any hints of a response, with Catherine Mann due to speak on Monday and Deputy Governor Dave Ramsden on Friday.
Appearances at the Conservative Party conference in Birmingham by Kwarteng at the start of the week and Prime Minister Liz Truss on Wednesday will be watched for any signs of a U-turn.
In the euro region, further ECB comments on the possible size of a rate hike later this month will draw scrutiny, not least since news that inflation has reached for the first time ever in the currency’s history. An account of the September decision released on Thursday may also offer clues.
Just as coalition talks continue in Italy, the ECB’s efforts to protect weaker currency-zone members will also draw focus, with bi-monthly data on Tuesday due to show a tally of officials’ bond purchases.
Policy makers are also expected to start a discussion on possibly shrinking their balance sheet when they gather for a catch-up in Cyprus on Wednesday.
Key data in the region include French and German industrial production numbers on Thursday and Friday respectively. In Switzerland, inflation data on Monday are likely to stay at the recent high of 3.5%, which is still only about a third of the pace in the euro region.
Several central banks elsewhere in Europe will take decisions. Another rate increase is expected in Romania, while officials in Poland and Serbia will determine whether to pause their series of hikes or keep going. Icelandic policy makers will also meet.
In the Middle East, the Bank of Israel is expected to raise its base rate by as much as 75 basis points on Monday after vowing to get “aggressive” with a series of hikes. The bank may also cut its growth forecast for 2023.
A release the same day is expected to show Turkey’s inflation accelerated further past 80% in September. The Turkish central bank isn’t blinking, though, and President Recep Tayyip Erdogan said in the past week that he wanted to see the benchmark rate lowered to single digits by the end of the year.
The Bank of Uganda is likely to raise borrowing costs for a fourth successive meeting on Thursday to rein in core inflation that’s exceeded its 5% medium-term target since May. The central bank in September signaled its willingness to hike further if price growth isn’t tempered.
Economists predict Ghana will keep monetary policy unchanged on Friday, after raising rates by three percentage points at an extraordinary meeting in mid-August. The decision will likely be influenced by talks with the International Monetary Fund for a $3 billion loan.
- For more, read Bloomberg Economics’ full Week Ahead for EMEA
In Brazil, sales and industrial output figures are due but the focus will be on the outcome of Sunday’s presidential election. The final electoral polls suggest former president Luiz Inácio Lula da Silva could clinch an outright victory in the first round.
In Chile, the monthly and year-on-year GDP-proxy data for August should both have turned negative, presaging a challenging second half. Mexican remittances figure will likely soften from July’s record $5.3 billion.
Following the Colombian central bank’s underwhelming 100 basis-point rate hike — the consensus was for 150 — to 10% on Sept. 29, minutes of its meeting are keenly anticipated. Many analysts see policy makers 100-to-150 basis points short of a terminal rate.
On Thursday, the region’s longest serving central bank chief, Julio Velarde, is expected to extend a record tightening cycle in Peru with a 15th straight hike to 7%.
A slew of consumer prices reports can be expected to underscore just how entrenched inflation has become in Latin America’s big economies. In Peru’s capital of Lima, preliminary estimates see a moderate re-acceleration.
In a similar vein, inflation in Mexico is seen edging up ever so slightly, while the year-on-year print in Colombia is expected to hit a fresh 23-year high.
And while Chile’s central bank may be on the cusp of getting its long awaited peak inflation, some credit for that is due to a gathering recession.
- For more, read Bloomberg Economics’ full Week Ahead for Latin America
(Adds Brazil polls in Latin America section)
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