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(Bloomberg) — Upcoming news on the U.S. labor market, including the monthly nonfarm payrolls report, will give Federal Reserve policymakers a glimpse into whether further interest rate cuts are needed after one is all but certain in just two weeks.
With inflation slowing, though still faster than the Fed’s target, Fed Chairman Jerome Powell is expected to cut interest rates in September and said officials “are not seeking or wanting” further cooling in the labor market. The move came weeks after government data showed job growth fell short of expectations in July and the unemployment rate hit its highest level in nearly three years.
Next Friday’s August jobs report is expected to show payrolls in the world’s largest economy rose by about 165,000, according to the median estimate in a Bloomberg survey of economists.
Although higher than the small gain of 114,000 in July, average payroll growth over the past three months will slow to just over 150,000, the lowest level since early 2021. The unemployment rate is likely to fall slightly to 4.2% in August from 4.3%.
Friday’s report comes two days before the government releases job openings data for July. The number of unfilled positions, a measure of labor demand, is expected to have dropped to a three-month low of 8.1 million, just above a more than three-year low.
The number of job openings per capita, which the Fed watches closely, is currently at 1.2, similar to pre-pandemic levels, suggesting that labor demand 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 layoffs. Any sharp increase could add to concerns among Federal Reserve officials about a sluggish labor market.
Other job-related reports in the upcoming holiday-shortened week include weekly jobless claims and the ADP Research Institute’s snapshot of private employment data for August. In addition, the Federal Reserve will release its Beige Book on regional economic conditions, while the Institute for Supply Management will report on manufacturing and services purchasing managers’ indexes.
Check out Bloomberg Economics’ dice roll:
“Nonfarm payrolls are likely to improve from July’s disappointing reading, but a downward revision to the BLS’s initial estimate for the March 2024 reference period to 818,000 may make Fed officials less willing to take the initial reading at face value.”
The story continues
—Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins, economists. For the full analysis, click here
Elsewhere, the Bank of Canada is widely expected to cut interest rates for a third straight time as inflation has remained within its target range all year, allowing officials to focus on slack in the labor market.
Other highlights include PMIs across Asia, German industrial data and Brazilian GDP.
Click here to see what happened last week, and here’s our summary of what’s to come for the global economy.
Asia
Following the release of official data from China over the weekend, Asia will begin the week with a slew of August manufacturing PMI data from Indonesia, South Korea, Malaysia, Thailand, Taiwan and the Philippines.
China’s Caixin Manufacturing PMI is also released on Monday and is expected to resume expansion after falling below 50 in July.
Japan receives second-quarter business results on Monday. Capital investment is likely to pick up after falling in the three months to March, with revised economic growth figures to be incorporated into next week’s data.
In Australia, the focus is on current account data, which may also influence gross domestic product figures. These will be released on Wednesday and are expected to show a slight acceleration in economic growth from the previous quarter.
South Korea will review its second-quarter gross domestic product the next day, and the region also receives a slew of inflation data. Trade data for August released on Sunday showed export growth returned to double digits, a result that bodes well for the economic outlook and reflects the resilience of global demand for technology products.
Consumer price growth in Vietnam probably slowed to below 4 percent for the first time since March, while South Korea, Thailand, Taiwan, Indonesia and the Philippines were also expected to release data on consumer prices. Australia, Vietnam and Pakistan were to release trade statistics.
On the central bank front, Malaysia is due to set its short-term policy rate on Thursday, while Reserve Bank of Australia Governor Michelle Bullock is due to speak on the same day.
Europe, Middle East, Africa
Euro zone officials have until the close of trading on Wednesday to comment before a period of silence sets in before a decision on Sept. 12.
With inflation now at a three-year low, a second rate cut in the nascent rescue cycle looks increasingly likely. The German and French central bank governors are scheduled to attend.
The calendar is relatively light on data, with Germany likely to be a bright spot. Factory orders on Wednesday and industrial production the following day will shed light on the state of the country’s struggling manufacturers at the start of the third quarter.
Among regional reports on the agenda is the second reading of the euro zone GDP measure for the three months to June.
The UK is expected to be similarly quiet, with final manufacturing and services PMIs for August due on Monday and Wednesday.
Swiss consumer price data is likely to be in focus ahead of the SNB’s interest rate decision later this month. Inflation likely remained at 1.3% for the third straight month, well below the 2% ceiling set by policymakers.
Turning east, in Poland — where data on Aug. 30 showed the fastest inflation so far this year — the central bank is widely expected to keep its key interest rate unchanged at 5.75% on Wednesday. Governor Adam Glapinski is due to speak at a press conference the next day.
Data from South Africa on Tuesday may show the continent’s most industrialized economy has avoided a recession. Analysts expect it to grow 0.5% in the second quarter after a 0.1% contraction in the first three months, helped by improved energy supplies.
In Turkey, data is expected to show inflation fell by about 10 percentage points in August, from 62% to 52%. The central bank expects it to fall to around 40% by the end of the year.
African heads of state and Chinese President Xi Jinping will meet in Beijing from Wednesday to Friday for the Forum on China-Africa Cooperation, where they are expected to discuss new investment opportunities.
On Thursday, Egypt’s central bank is widely expected to keep its key interest rate at 27.5%. However, some analysts believe it may choose to start the easing process now, given the steady decline in price pressures over the past year.
Latin America
Brazil will release second-quarter economic growth data on Tuesday, which may reinforce the fact that demand is shrugging off the effects of tight monetary policy.
GDP is expected to have risen 0.9% month-on-month, faster than the pace in the first three months of the year, as a tight labor market and strong consumption boosted activity.
The publication is likely to benefit leftist President Luiz Inacio Lula da Silva, who has increased public spending while promising to improve living conditions for ordinary citizens in Latin America’s largest economy. It could further pressure the central bank to raise interest rates as early as September.
Next week will be critical for Chile’s economic data releases. The country’s central bank is likely to cut its key interest rate by 25 basis points to 5.5% on Tuesday after pausing its easing cycle at its last meeting.
The next day, the governor of the Central Bank of Chile is due to release his quarterly monetary policy report, which includes updated estimates of economic growth, inflation and the future path of borrowing costs.
On Friday, the government will publish consumer price data for August, which is expected to accelerate further above the 3% target due to a series of electricity price increases.
— With assistance from Matthew Malinowski, Piotr Skolimowski, Laura Dhillon Kane, Brian Fowler, and Monique Vanek.
(Updated with section on South Korea’s trade in Asia)
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