(Bloomberg Opinion) — U.S. job growth likely moderated last month after a blistering pace in January, while the unemployment rate likely held at a 53-year low, illustrating a labor market which has proven impervious to massive interest rate hikes from the Federal Reserve.
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The report will follow testimony from Fed Chairman Jerome Powell on Tuesday and Wednesday when he delivers the semiannual monetary policy report to lawmakers. His comments may shed light on whether investors are on the same page with the central bank’s view on how much it will have to raise rates to reduce inflation.
Payrolls increased by 215,000 in February, according to the median forecast in a Bloomberg survey. To start the year, US employers added more than half a million workers and the unemployment rate fell to 3.4%, results that dashed expectations of a short-term pause in the Fed’s tightening drive. .
Friday’s jobs report will be the last before the Fed meets on March 21-22 to consider another 25 basis point rate hike or potentially be more severe in light of recent data showing stubborn inflation. . Officials will also have February’s consumer price index and retail sales data on hand before they meet.
“If the data shows that the reacceleration earlier in the year was short-lived, the Fed’s narrative would be much easier,” Bank of America Corp. economists, led by Michael Gapen, said in a report. “A little bit of bad news would be good news for the Federal Reserve.”
Resilient labor demand has fueled wage growth, which in turn props up consumer spending and raises employer costs. That risks keeping inflation high for longer and helps explain why swap markets are now pricing in a top benchmark rate of 5.5% in September. The reference rate is currently located in a range of 4.5% to 4.75%.
What Bloomberg Economics Says:
“But our analysis suggests that many of the high-profile layoffs that have been announced, in technology, for example, only translate into job losses about two months later. If that’s correct, we should expect to see an increase in initial jobless claims in March.
The March jobs reports, which won’t be released until after the next FOMC meeting, will likely show stronger signs that the labor market is weakening. Unfortunately, the Federal Reserve cannot wait until the fog clears before making policy decisions.”
—Anna Wong, Stuart Paul, and Eliza Winger, economists. For a full analysis, click here
Powell is likely to be asked by lawmakers if a half percentage point move is being considered. The Fed raised rates by a quarter point on February 1, turning down from a half-point hike in December that came after four consecutive 75 basis point moves.
Elsewhere, Canada’s central bank may halt rate hikes, Australia’s will likely rise again, and the Bank of Japan’s decision will mark the end of an era.
Click here to see what happened last week, and below is a summary of what’s coming up in the global economy.
Canada
In Canada, Governor Tiff Macklem will become the first Group of Seven central banker to take his foot off the monetary brake on Wednesday.
The Bank of Canada is expected to hold rates steady at 4.5% in its first decision since officials declared a conditional pause in January. Macklem said it would take an “accumulation of evidence” that the economy was not performing as predicted for policymakers to stay on the sidelines, and so far that has not materialized.
Canada’s inflation slowed to 5.9% at the start of the year from a peak of 8.1%, and output leveled off in the fourth quarter. The labor market, however, remains tight, with a fresh batch of jobs data due Friday after two back-to-back burst reports.
Asia
China has set a modest economic growth target of around 5% for the year, and the nation’s top leaders have eschewed any big stimulus to jump-start a recovery still marred by weak business confidence and an uncertain housing market.
Recent data has shown that the economy’s recovery is strengthening, with trade and inflation figures to be released later this week.
Haruhiko Kuroda makes his final policy decision as Bank of Japan governor on Friday as a momentous decade-long mandate of unprecedented stimulus comes to a close.
While he has one last chance to surprise the markets with a move that could help his likely successor Kazuo Ueda, the consensus is that Kuroda will end with hardly a whimper as a season that began with a bang on buying bazooka of bonuses ends with a simple position. -pat.
The week kicks off with inflation figures from South Korea that will test how seriously Bank of Korea Governor Rhee Chang-yong should consider raising interest rates again after stopping the cycle. adjustment last month.
The Reserve Bank of Australia meets on Tuesday and is expected to follow through with another percentage rate hike in a quarter, even after recent data showed slower-than-expected growth and cooling inflation. Under pressure, Governor Philip Lowe will have the chance to explain the decision the next day amid mounting angst over Australia’s cost-of-living crisis.
Europe, Middle East, Africa
After a week in which eurozone core inflation hit a new record high, the next few days offer the last chance for policymakers to comment before a pre-decision lock-in period ahead of their March 16 meeting. . Investors are betting that the European Central Bank’s deposit rate will rise to as much as 4% in the coming months.
Speaking in an interview posted on the ECB’s website on Sunday, President Christine Lagarde said a half-point rate hike this month is “very, very likely.”
Lagarde is scheduled to speak again this week, as are chief economist Philip Lane and Executive Board member Fabio Panetta.
It’s a quieter week than usual for Eurozone data. German factory orders and industrial production on Tuesday and Wednesday respectively will be among the highlights.
In the UK, figures on Friday will reveal whether the economy started 2023 with an expansion, keeping a widely predicted recession at bay for longer. Gross domestic product probably rose 0.1% in January from a month earlier, according to the median forecast of economists.
Consumer price data in other parts of Europe will draw investors’ attention. Starting Monday, Swiss statistics will likely show slower inflation in February, with economists anticipating a 3% result. Price growth in the Czech Republic and Norway, expected for Friday, may also have weakened.
Hungary, which had the fastest inflation in the European Union in January, is likely to have suffered a similar result above 25% last month. That release arrives on Wednesday.
Polish policymakers on the same day are likely to keep their rate at 6.75%, while on Thursday, their Serbian counterparts could raise borrowing costs again.
In Sweden, the monthly GDP indicator for January can signal whether the largest Nordic economy started the year with another contraction. With a recession looming and the housing market slumping, investors can focus on speeches by officials including Riksbank Governor Erik Thedeen on Tuesday. Thedeen said on Saturday that curbing inflation remains the priority.
Farther east, Russia reports car sales on Monday, which are expected to continue to decline sharply amid the exit of Western manufacturers. Will watch the monthly inflation data on Friday for signs that price pressures are building.
In South Africa, data on Tuesday will likely show the economy contracted in the fourth quarter as record power outages stifled production and discouraged investment. In figures from last month, mining and manufacturing output, which account for about a fifth of total GDP, declined in the December quarter.
Egyptian inflation forecast for Thursday is likely to show another acceleration after food prices hit a record and the effects of the latest currency devaluation trickled in.
Data on Thursday is expected to show Saudi Arabia’s non-oil sector expanded at the strongest pace in more than a year and helped the kingdom post the fastest overall growth among the world’s major economies late last year.
Latin America
In Argentina, construction activity and industrial production in January may extend the downward trends, due in large part to trade and exchange controls that make it difficult to import materials.
After a surprise decision to keep the benchmark rate unchanged in February at 7.75% after 18 consecutive increases, Peru’s central bank is facing it at this week’s policy meeting. Nationwide protests that have affected economic activity have also put pressure on inflation, which is currently near its June 2022 peak of 8.81%.
Closing out the week, the last of the five large economies in the region publishes consumer price reports for February. While Chile, Mexico and Brazil appear to be on the falling side of peak inflation, many analysts expect above-target readings to plague the trio in 2025.
A third month of slowdown in Chile may only bring the headline rate down to 12%, while early estimates for Mexico see a drop to around 7.7%, the first drop in three months and just 100 basis points below the peak. of the cycle.
And while Brazil’s central bank has cut 600 basis points from its headline reading, inflation is now bogged down to just below 6%, roughly where local analysts see it at the end of the year.
–With assistance from Gregory L. White, Robert Jameson, Stephen Wicary, Malcolm Scott, and Andrea Dudik.
(Updates with the China congress in the Asia section, Lagarde in the EMEA section).
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