The state of the US job market and the outlook for the Federal Reserve will be the main drivers of financial markets in the coming week.
On Friday, the February jobs report is expected to show 200,000 jobs added last month, a slowdown in job growth from stronger-than-expected January numbers that showed 517,000 jobs were added to the economy in the first month of the year.
The unemployment rate is expected to remain steady at 3.4%, the lowest since 1969, according to Trading Economics.
Bank of America economists led by Michael Gapen wrote in a note to clients on Friday that they “suspect some of it [January’s strong report] Noise was and is related to unseasonably warm weather.” The firm estimates that January job gains were closer to 350,000, a number that is still far higher than expected but close to the average monthly job gains for the past six months.
Wage growth will also be a focus of the jobs report, with average hourly wages expected to rise 0.3% mom and 4.7% yoy, with the year-to-date figure down from last month’s 4.4% rise accelerated.
Elsewhere in the economic calendar, Wednesday will feature the week’s key data, including ADP’s monthly data on personal wage bill growth, the BLS’ January job vacancies report and the Fed’s Beige Book, all ready for release.
A key question for investors over the coming weeks will be whether February data supports the view that the US economy has accelerated in early 2023, or whether strong reports will prove to be one-off events.
For its part, Gapen’s team has consistently found that increased cost-of-living adjustments for Social Security beneficiaries — in addition to the aforementioned weather impact on jobs — likely boosted spending in January.
Investors will also be keeping an eye on Washington, DC next Tuesday and Wednesday as Federal Reserve Chairman Jerome Powell is scheduled to address the Senate Banking Committee and House Financial Services Committee on Tuesday and Wednesday mornings, respectively.
The story goes on
Federal Reserve Chairman Jerome Powell testifies before a hearing of the Senate Committee on Banking, Housing and Urban Affairs on the ‘Semi-Annual Monetary Policy Report to Congress’ on Capitol Hill in Washington, DC, U.S., June 22, 2022. Portal /Elizabeth Frantz
In the Fed’s semi-annual monetary policy report to Congress, released on Friday, the central bank reiterated its commitment to keeping interest rates high to bring inflation down, writing, “The Federal Reserve is acutely aware that high inflation creates significant difficulties.” entails, especially for the least able to bear the higher cost of basic necessities. The Committee is strongly committed to bringing inflation back to its 2% target.”
The Fed also included a chart showing the three main measures of inflation — goods inflation, services inflation and non-home services inflation — that officials have highlighted over the past few months.
The Federal Reserve’s three main inflation measures show that commodity inflation is slowing, housing inflation is still rising and “core” inflation remains stubbornly high. (Source: US Federal Reserve)
“Price inflation for core services remains high,” the central bank wrote in its report. Noting that housing service prices have risen rapidly, the Fed wrote, “Because housing service prices measure the rents paid (and the corresponding rent implicitly paid by all homeowners) — including those whose leases are paid — by all tenants Not due for renewal yet – they tend to be slow to adjust to changes in rental market conditions and should therefore slow down in the coming year.”
The central bank continued: “By contrast, prices for other core services – a broad group that includes services such as travel and food, financial services and auto repairs – rose 4.7 percent in the 12 months to January and have yet to show any significant increases signs of a slowdown. Some softening of labor market conditions will likely be required for price inflation in core services to ease.”
On the earnings side, highlights will include results from Ulta Beauty (ULTA), Dick’s Sporting Goods (DKS) and BJ’s Wholesale (BJ), with investor focus remaining on the retail sector.
Last week, all three major moving averages rallied on the Nasdaq pacemaker gains, rising nearly 3% while the Dow and S&P 500 both posted weekly gains of just under 2%. This came as the 10-year Treasury bills hit a four-month high during the week and eventually settled just below the 4% mark as investors continue to brace for more rate hikes from the Fed.
Overall, this week’s events should update investors on the Fed’s ongoing efforts to raise interest rates to curb inflation.
“February’s payroll report and Fed Chair Jerome Powell’s testimony before Congress next week should provide a clearer indication of whether recent talk of ‘longer-term higher’ interest rates is warranted,” wrote Andrew Hunter, US Deputy Chief Economist at Capital Economics.
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economic calendar
Monday: Factory orders, January
Tuesday: Wholesale Inventories, January; Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee
Wednesday: MBA Mortgage Applications; ADP Employment Report, February; Trade Balance, January; Job Vacancies and Turnover Survey, January; Federal Reserve Chairman Jerome Powell Testifies Before House Financial Services Committee; Federal Reserve beige book
Thursday: Challenger job cuts, February; Initial jobless claims
Friday: Monthly US jobs report, February
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results calendar
Monday: Lordstown Motors (RIDE); WW (WW)
Tuesday: Dick’s Sporting Goods (DKS); Casey’s General (CASY); Crowd Strike (CRWD); Manchester United (MANU); Sea Limited (SE); stitch fixation (SFIX); Thor Industries (THO)
Wednesday: Campbell’s Soup (CPB); Brown Forman (BF-B); Grain/Ferry (KFY); MongoDB (MDB); The Children’s Square (PLCE); United Natural Foods (UNFI)
Thursday: Ulta Beauty (ULTA); Allbirds (BIRD); American Outdoor Brands (AOUT); BJ’s Wholesale (BJ); DocuSign (DOCU); fuel cell energy (FCEL); gap (GPS); JD.com (JD); National Drink (FIZZ); Smith & Wesson Trademarks (SWBI); Vail Resorts (MTN); Zumiez
Friday: The Buckle (BKE)
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