(Bloomberg) — U.S. employers likely moderated their hiring as wage growth moderated in June, another favorable development for Jerome Powell and his Federal Reserve colleagues seeking more confirmation that inflation is slowing.
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Payrolls in the world’s largest economy are expected to have risen by about 190,000, according to a Bloomberg survey of economists ahead of Friday’s report. That’s down from May’s surprisingly strong gain of 272,000. The unemployment rate has probably been held at 4%.
Average hourly earnings are forecast to have risen 3.9% from June last year, the smallest annual advance in three years.
The latest data, including declining job vacancies and higher weekly jobless claims, underscores cooler but resilient job demand. Having more workers available to choose from is helping companies pull back from the large wage increases that had been a source of inflationary pressures in recent years.
The closely watched jobs report will be released days after a panel on Tuesday in Portugal that includes Fed Chairman Powell. Investors will monitor his comments for clues on how soon the US central bank might start cutting interest rates. Christine Lagarde, Powell’s eurozone counterpart, will also be on a panel at the European Central Bank’s annual forum in Sintra.
While not on the wave, the US labor market remains healthy, allowing consumer spending and the broader economy to continue to grow, despite higher borrowing costs.
Another key report for the holiday-shortened week ahead in the US is expected to show a further decline in job openings, suggesting companies are having more success filling positions. May openings are forecast to have fallen below 8 million for the first time since the start of 2021.
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In Canada, June’s labor force survey will provide insight into a labor market that has failed to keep pace with explosive population growth and yet has racked up above-average wage gains. We will also take a look at the country’s international trade balance.
Elsewhere, the second half of 2024 will kick off with a busy week. Chinese business survey data and eurozone inflation are among the highlights, and elections in France and the UK will also focus investors.
Click here for what happened last week and below is our summary of what’s to come in the global economy.
asian
It’s a big week for buying manager indices. China’s official PMI showed factory activity contracted for a second straight month in June, signaling weakness in an area where Beijing is betting to boost the economy.
Caixin’s manufacturing PMI for the country – due on Monday – could be lower.
Other Caixin PMIs are released later in the week, along with PMIs for Indonesia, South Korea, Myanmar, the Philippines, Malaysia, Thailand, Taiwan, Vietnam and Singapore.
In other data, the Bank of Japan’s Tankan survey is expected to show business sentiment remained broadly stable in the second quarter, with the gauge for large service sector firms easing from a three-decade high to the previous period. Capital projections for this fiscal year are expected to increase in the double digits.
Later in the week, Japan’s household spending data could show spending peaked in May, a result that would keep the BOJ on track for a rate hike as early as July.
Trade data is due in Australia and South Korea, while inflation reports are scheduled for South Korea, Indonesia, Pakistan, Thailand, Taiwan and the Philippines.
Among central banks, minutes from the Reserve Bank of Australia’s June meeting will draw a lot of attention on Tuesday after Governor Michele Bullock said the board considered a rate hike at that meeting.
Europe, Middle East, Africa
Politics will dominate the region, with crucial elections in the UK and France heralding new governments and potentially changing the tone for economic policy in each country.
Britons go to the polls on Thursday, with voters poised to oust the Conservatives from power after 14 years. The pressing question for the UK is how much of a majority Labor leader Keir Starmer will be able to command in parliament.
In France, the first round of voting for the National Assembly takes place on Sunday, with a runoff a week later. Initial results on Monday showing the level of support for Marine Le Pen’s far-right National Rally could prompt a market reaction.
The fallout from the first round could overshadow the ECB’s annual retreat in the Portuguese resort of Sintra, where officials will gather to discuss economic issues. The event kicks off on Monday with a speech by Lagarde.
On the minds of eurozone officials in Sintra will be the latest inflation reading for the eurozone, also due on Tuesday, after Germany’s report on Monday. Economists forecast a slight slowdown in both aggregate and core measures of price growth after a setback in May.
Also from the ECB will be an account of its latest policy decision, due on Thursday, a day after Sweden’s Riksbank publishes the minutes of its meeting from June 27.
Other national data within the euro area may focus investors. German and French industrial production on Friday, both for May, will show mid-second quarter output strength in the region’s two largest economies.
Switzerland will also release inflation data. This report on Thursday will show whether consumer price growth remains well below the central bank’s 2% target – a good backdrop that allowed policymakers to cut rates earlier this month.
Turning to the east, several monetary policy decisions are among the highlights. On Wednesday, Poland’s central bank was likely to keep borrowing costs steady, as worries about fast wage growth outweigh concerns about an economic recovery.
And on Friday, Romania’s central bank may deliver a long-awaited rate cut after inflation – the highest in the European Union – slowed more than expected. The first cut in more than three years would follow a surprise wait in June, when officials remained cautious amid a widening budget deficit and rising wage demands.
Looking south, Turkish consumer price inflation on Wednesday is expected to finally slow after more than a year of aggressive rate hikes. Analysts expect inflation to soften to 72.6% from 75.5% in May. The central bank aims to bring it below 40% by the end of the year, something most Turks and many foreign investors doubt can be achieved.
On Friday, the South African Bureau of Economic Research will release a survey of inflation expectations for the second quarter. This will be closely monitored by the central bank, which uses such measures two years in advance to inform its decision-making. Officials said at the latest policy meeting that they are concerned that inflation expectations have risen.
Latin America
The new month kicks off with central bank surveys of economists in Brazil and Mexico, while Chile posts rough May GDP readings and Peru releases June’s inflation report for its capital.
Economic activity and demand are on the rise in Chile, while a consumer price report in Lima could underline the persistence of core inflation that prompted the central bank to give an unexpected pause in interest rates on June 13.
In Colombia, the central bank publishes on Thursday the minutes of the June 28 policy meeting, in which the BanRep board – led by Governor Leonardo Villar – cut borrowing costs to 11.25% in a fifth consecutive cut.
Economists polled by the central bank see another 275 basis points of easing in 2024, with inflation slowing to 5.7% by the end of the year.
In Brazil, President Luiz Inacio Lula da Silva’s second term as president has managed to pull the industry out of a prolonged funk, but the sector remains short of its former glory. The May data is likely to highlight the lingering tight financial conditions and subdued demand.
In an easy week for Argentina, the highlight will be the central bank’s survey of local economists. While monthly inflation has returned to single digits, economists see the current pace of monthly readings as a floor in the near term.
–With assistance from Robert Jameson, Piotr Skolimowski, William Horobin, Laura Dhillon Kane, Paul Wallace, and Monique Vanek.
(Updates with China Asia PMI section)
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