The US jobs report should bring some comfort to the Fed

(Bloomberg) – U.S. employers are gradually slowing the pace of hiring and hourly earnings are moderating, offering some comfort to Federal Reserve policymakers in their bid to tackle still-high inflation.

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Government data on Friday is expected to show payrolls in the world’s biggest economy rose by less than 200,000 in May, down from average monthly job growth of around 370,000 over the past year. past year. Profits are expected to rise 0.3% from the previous month, when they posted the strongest advance in a year.

Another report in the coming week is expected to show the fewest open positions in two years. Although job vacancies are still around 2 million higher than pre-pandemic levels, a fourth consecutive monthly decline in job vacancies in April would underscore a gradual easing of harsh working conditions that have helped fuel inflation. over the past year.

The latest snapshots of the labor landscape, which come after White House and Republican negotiators reached a tentative deal to raise the US debt ceiling, will provide Fed officials with clues about the impact of the tightening credit conditions, rising interest rates and growing economic concerns.

Policymakers will then meet on June 13-14 to decide whether another quarter-point hike in the benchmark rate is warranted after data this week showed faster inflation and resilient demand at the start of the second quarter. .

Fed officials scheduled to speak next week include regional bank presidents Thomas Barkin of Richmond and Patrick Harker of Philadelphia, as well as board member Philip Jefferson.

What Bloomberg Economics says:

“May jobs data should show a slowing pace of hiring, but not enough to reassure the Fed. Volatility in monthly payrolls data masks a gradual slowdown in the pace of hiring since late 2021 – although the cooling of the labor market has been slower than expected by most analyses.

—Anna Wong, Stuart Paul, Eliza Winger and Jonathan Church, economists. For a full analysis, click here

Further north, Statistics Canada will release gross domestic product for the first quarter, providing crucial information on whether the economy is cooling enough for the Bank of Canada to hold rates steady next month.

Elsewhere, data showing slowing inflation in the euro zone, surveys of Chinese purchasing managers and multiple GDP reports could attract investors’ attention.

Click here to see what happened last week and below is our summary of what else is happening in the global economy.


The Chinese Purchasing Managers Indices will be a highlight in the region. On Wednesday, economists predict that the official PMI will show the deterioration in manufacturing easing slightly, while robust growth in the non-factory indicator is expected to slow.

The Australian inflation figure for April, due the same day, could prove crucial for Reserve Bank watchers. The median forecast is for a slight acceleration, to 6.4%, although some economists believe it will remain flat or even slow.

In India, GDP data for the first quarter released on Wednesday could show a recovery, with domestic and foreign demand helping to boost growth.

Thailand’s central bank is expected to raise its rate by a quarter point on the same day, with Sri Lankan officials also expected to deliver a verdict on monetary policy.

And in Japan, industrial production on Wednesday is expected, according to economists, to have increased for a third month in April.

Europe, Middle East, Africa

Thursday’s latest eurozone inflation reading could draw particular attention, with data expected to show frustratingly slow progress for the European Central Bank in reducing price pressures.

Headline consumer price growth is expected to weaken to 6.3% in the 20-nation currency area, while the underlying measure that excludes volatile items such as energy could be little changed to 5.5 %. Both readings would remain well above the ECB’s 2% target.

National reports by then will likely highlight the discrepancies in the region. Spanish inflation on Tuesday is expected to slow to 3.3%, while readings in France, Italy and Germany the next day could all remain above 6%.

Central bank governors from Croatia, Austria and Italy are among the ECB policymakers due to speak, and the minutes of the May 4 meeting will be released on Thursday.

The institution’s latest financial stability report, due the day before, will also attract attention, especially after the turmoil in the banking sector in the United States and Switzerland.

It will be quiet in the UK, which starts the week with a bank holiday, as much of Europe does. A speech by Bank of England head Catherine Mann on Wednesday and consumer loan data the next day are among the main events there.

Swiss GDP on Tuesday could show the economy showing little progress in the first quarter after stagnating for the previous three months. This remains respectable given the integration of the economy with that of Germany, which suffered a recession.

Swedish first-quarter GDP data will be released on the same day, with no growth expected by economists after a decline in the previous period. The European Commission predicts that the country will face the worst economic crisis in the European Union in 2023.

Several Russian reports will be released on Wednesday, including on industrial production, weekly inflation, retail sales, wages and unemployment.

Turning to the south, Turkey is releasing growth data on Wednesday. The election there will be closely watched as President Recep Tayyip Erdogan takes on Kemal Kilicdaroglu in a runoff on Sunday.

Erdogan did better than polls predicted in the May 14 first round, falling just short of the 50% threshold needed to avoid another round of voting. The markets are favoring him for another mandate.

In Africa on Monday, Kenya’s rate-setting committee is poised to leave borrowing costs unchanged as it monitors the impact of a massive hike in March after inflation slowed last month. .

The next day, Lesotho, whose currency is pegged to the South African rand, will likely follow its neighbor and raise rates. And on Wednesday, neighboring Mozambican authorities may hold the benchmark rate steady for a fourth consecutive meeting.

Latin America

Banco Central de Chile’s May 12 meeting minutes, to be released on Monday, will likely echo the central conclusion of the post-decision statement: slow disinflation leaves policymakers no choice but to remain at 11.25% for the foreseeable future.

Minutes from the May 18 Banxico meeting are expected to highlight the board’s concern that the inflation outlook is “complicated and uncertain” so Mexico’s central bank will have to keep rates high – they are now at a record high of 11.25% – and stable for a long time. period of time.

Banxico’s quarterly inflation report released midweek could see economic output forecasts raised while inflation forecasts are revised down on the back of a strong peso and a jump in foreign investment fueled by offshoring.

Four of the five major economies in the region will release unemployment data. Unemployment is rising in Brazil and Chile after recovering from pre-pandemic levels, nearing post-pandemic lows in Colombia, while sitting at a record low of 2.39% in Mexico.

Latin America’s largest economy likely rebounded in the first three months of 2023 thanks to one-off factors such as government social benefits and a strong harvest. Most analysts see Brazil heading for at least four years of below-average growth, posing a significant challenge to President Luiz Inacio Lula da Silva’s agenda.

–With help from Robert Jameson, Laura Dhillon Kane, Monique Vanek and Paul Richardson.

(Updates with the debt ceiling agreement in the fourth paragraph)

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