(Bloomberg) — U.S. employers likely held back on hiring and wage growth slowed in June, another encouraging development for Federal Reserve Chairman Jerome Powell and his colleagues at the central bank who are seeking further assurances that inflation is slowing.
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A Bloomberg survey of economists ahead of Friday’s release showed the world’s largest economy is expected to add about 190,000 jobs, down from a surprisingly strong gain of 272,000 in May. The unemployment rate will probably hover around 4%.
Average hourly wages are expected to rise 3.9% from June last year, the lowest annual increase in three years.
Recent data, including a decline in job openings and an increase in weekly unemployment claims, suggest that demand for labor is cooling but resilient. With more workers to choose from, companies can back off from the big wage hikes that have fueled inflationary pressures in recent years.
The closely watched jobs report comes just days after a panel discussion in Portugal on Tuesday featuring Fed Chairman Jerome Powell, who will be closely watched by investors for clues as to when the U.S. central bank might start cutting interest rates. Powell’s euro zone counterpart, Christine Lagarde, is also due to appear on a panel at the European Central Bank’s annual forum in Sintra.
The U.S. labor market remains healthy despite the economic slowdown, and consumer spending and the overall economy remain strong despite rising borrowing costs.
Another key report next week, when the U.S. holiday is shortened, is expected to show a further decline in job openings, suggesting that companies are having more success recruiting: Job openings in May are forecast to fall below 8 million for the first time since the beginning of 2021.
Bloomberg Economics’ take…
“We had expected growing signs that long-lag monetary policy was influencing the economy. Next week’s data should provide further evidence.”
—Estelle Wu, Stuart Paul, Eliza Winger, Anna Wong, and Chris G. Collins, Economists. For a more detailed analysis, click here.
In Canada, the June labour force survey will provide insight into a job market that has struggled to keep up with explosive population growth while posting above-average wage gains, as well as the country’s international trade balance.
Meanwhile, the second half of 2024 kicks off with a busy week, with Chinese business survey data and eurozone inflation in the spotlight, while the French and UK elections will also be on investors’ radar.
Click here to read about last week’s events, and below for our outlook for the global economy.
Asia
This is an important week for purchasing managers’ indices: China’s official PMI showed manufacturing activity contracted for a second straight month in June, signaling weakness in a sector the Chinese government counts on to drive the economy.
The country’s Caixin manufacturing PMI, due for release on Monday, is likely to decline.
Other Caixin PMIs will be released later this week, along with those from Indonesia, South Korea, Myanmar, the Philippines, Malaysia, Thailand, Taiwan, Vietnam and Singapore.
In other data, the Bank of Japan’s Tankan survey showed business confidence is expected to be broadly stable in the second quarter, with a reading for the large service sector likely to slip slightly from a 30-year high in the previous quarter. Capital investment forecasts for the current fiscal year are expected to rise by double digits.
Later this week, Japanese household spending data is expected to show an upturn in spending in May, which could prompt the Bank of Japan to raise interest rates as early as July.
Trade data is due to be released in Australia and South Korea, while inflation reports are due in South Korea, Indonesia, Pakistan, Thailand, Taiwan and the Philippines.
Among central bankers, the minutes of the Reserve Bank of Australia’s June meeting will be the focus of much attention on Tuesday after Governor Michelle Block said the bank’s board considered raising interest rates at that meeting.
Europe, Middle East, and Africa
Politics will take center stage in the region, with important elections in the UK and France likely to usher in new governments and change the direction of economic policy in each country.
With British voters poised to oust the Conservative Party after 14 years in power when the country goes to the polls on Thursday, the immediate question for Britain is how big a majority Labour leader Keir Starmer will be able to secure in Parliament.
France held the first round of voting for its National Assembly on Sunday, with a runoff election a week later. Initial results on Monday will indicate the level of support for Marine Le Pen’s far-right Rally National party and could trigger a market reaction.
The fallout from the first round may overshadow the ECB’s annual meeting in the Portuguese resort town of Sintra, where officials are due to meet to discuss economic issues. The meeting begins on Monday with a speech from Lagarde.
Euro zone officials in Sintra will be closely watching the bloc’s latest inflation reading, due out on Tuesday after Germany’s on Monday. Economists expect both headline and underlying measures of price growth to slow slightly after a setback in May.
The ECB is also due to publish a report on its recent policy decisions on Thursday, a day after the Riksbank is due to publish the minutes of its June 27th Governing Council meeting.
Data from other euro zone countries may also attract investors’ attention. German and French industrial production due on Friday for May will provide a glimpse of manufacturing strength midway through the second quarter in the region’s two biggest economies.
Switzerland is also due to release inflation data on Thursday, a report that will show whether consumer price inflation is running well below the central bank’s 2% target, a favorable situation that allowed policymakers to cut interest rates earlier this month.
Looking east, several monetary policy decisions will be in focus. Poland’s central bank is likely to keep borrowing costs unchanged on Wednesday as concerns about a sharp rise in wages outweigh worries about a fragile economic recovery.
Romania’s central bank also could deliver a much-needed interest rate cut on Friday after inflation, the highest in the European Union, slowed more than expected. The first cut in more than three years would come after it unexpectedly left rates unchanged in June, when authorities remained cautious amid a widening budget deficit and rising wage demands.
Looking south, Turkey’s consumer price index growth is expected to finally slow on Wednesday after more than a year of aggressive rate hikes. Analysts expect inflation to fall to 72.6% from 75.5% in May. The central bank aims to keep inflation below 40% by the end of the year, but most Turks and many foreign investors doubt that can be achieved.
The South African Institute of Economic Research is due to release its second-quarter inflation expectations survey on Friday. The results will be closely watched by the central bank, which uses two-year-ahead readings to inform policy decisions. Officials at their last policy meeting said they were concerned about rising inflation expectations.
latin america
The new month will kick off with surveys of economists from Brazil and Mexico’s central banks, while Chile will release its GDP proxy for May and Peru will release its capital city’s June inflation report.
Economic activity and demand are rising in Chile, but the Lima consumer price report may underscore the persistence of core inflation, which led the central bank to unexpectedly keep interest rates unchanged on June 13.
In Colombia, the central bank released minutes of its June 28 policy meeting on Thursday, in which the bank’s governing council, led by Governor Leonardo Villar, cut borrowing costs to 11.25% in a fifth consecutive rate cut.
Economists surveyed by the central bank expect a further 275 basis points of easing in 2024, with inflation falling to 5.7% by the end of the year.
In Brazil, President Luiz Inacio Lula da Silva’s second term has succeeded in guiding the industry out of a protracted recession, but the industry is far from its former glory, and May’s data is likely to highlight the drag caused by tough financial conditions and weak demand.
It’s a quiet week for Argentina, but the focus will be on a central bank survey of the country’s economists. Monthly inflation is back in the single digits, but economists say the current pace of monthly inflation represents something of a bottom in the short term.
–With assistance from Robert Jameson, Piotr Skolimowski, William Horobin, Laura Dhillon Kane, Paul Wallace, and Monique Vanek.
(China PMI update in Asia section)
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