US Jobs Report Supports Kevin Warsh’s Labour Market View
US payrolls growth rebounded in August, aligning with the overall stability in the labour market, which is allowing the Federal Reserve to concentrate more sharply on its efforts to combat inflation. Economists project that the monthly jobs report from the Bureau of Labour Statistics, scheduled for release on Friday, will indicate an increase of 55,000 in payrolls following an unanticipated decline in employment during July. Such a result would align closely with the average job growth observed this year. The unemployment rate, derived from a household survey rather than one focused on establishments, is anticipated to remain steady at 4.1 percent. Steady labour demand coupled with constrained layoffs is “consistent with full employment,” remarked Fed Chairman Kevin Warsh on Friday during the US central bank’s annual conference in Wyoming. The stable job market has driven consumer spending and enabled the broader economy to advance. With employment growth persisting, Federal Reserve officials are focusing intently on price stability – the other component of the central bank’s dual mandate. Inflation has consistently remained elevated, surpassing the Federal Reserve’s target of 2 percent for several years. The jobs report will conclude a hectic week on the US economic data calendar, which features the BLS’s July job openings and labour turnover survey on Tuesday. In light of Warsh’s comments, which sufficiently elevated the likelihood of an interest-rate hike at the Fed’s September policy meeting to over 50 percent, investors will be looking for insights regarding inflation from two industry reports in the upcoming week.
The Institute for Supply Management is set to publish its manufacturing survey on Tuesday, with the services version scheduled for release on Thursday. Both encompass metrics related to the costs incurred for materials. Canada faces a significant week ahead, highlighted by the Bank of Canada rate decision on Wednesday, where no alterations are expected. This will be succeeded by the release of international trade data on Thursday and labour market statistics on Friday. Looming over it all is the contentious breakdown of Canada-US trade negotiations and impending tariffs from both parties. There are currently no indications that negotiations will be restarting in the near future. Elsewhere, a rise in euro-zone inflation, a potential rate hike in New Zealand, and a meeting of Group of 20 finance ministers in Asheville, North Carolina, could be among the notable events. Central bank decisions from New Zealand and Malaysia will be pivotal as policymakers evaluate the repercussions of the West Asia crisis, escalating tariff tensions, and a disparate regional growth landscape increasingly influenced by the artificial-intelligence surge. The Reserve Bank of New Zealand may implement another round of monetary tightening on Wednesday, as the ongoing fuel shock continues to impact the economy. However, the lacklustre demand – as evidenced by softening employment, retail sales, and mortgage lending – may prompt policymakers to reconsider their strategies.
Bank Negara Malaysia is expected to maintain its current stance during the upcoming meeting on Thursday. Malaysia has emerged as a standout performer in the region, bolstered by energy subsidies that have maintained low inflation levels and a thriving AI sector that is driving strong economic growth. Others in Asia face heightened vulnerability as the uncertainty surrounding a US-Iran peace deal perpetuates the risk of sustained elevated energy costs. South Korea and the Philippines, both significant importers of oil, are set to release their inflation data on Wednesday and Friday, respectively. Meanwhile, India is set to release its second-quarter GDP figures on Monday. Growth is anticipated to decline marginally, yet it remains robust at 7.3 percent, as consumption and services continue to perform well in the face of price pressures. Australia’s GDP data is set to be released on Wednesday, as elevated interest rates and a worsening housing downturn exert pressure on economic growth. Lastly, factory gauges will provide another indication of the region’s economic health. China begins the week with the release of official PMIs on Monday, succeeded by a comprehensive array of August factory surveys on Tuesday from Japan, South Korea, Indonesia, Malaysia, the Philippines, Thailand, and Taiwan. China’s RatingDog manufacturing PMI is also forthcoming. The readings will provide a snapshot of how Asian manufacturers are navigating the reemergence of tariff tensions, even as AI-related demand continues to support certain sectors of the region. South Korea’s August exports will serve as a crucial indicator of the technology cycle, especially in relation to semiconductor demand.
Euro-area inflation likely accelerated in August to its highest rate since 2023, maintaining pressure on policymakers to consider increasing interest rates. Consumer prices are anticipated to have risen by 3.3 percent year-over-year, based on the median of 31 forecasts for the data set to be released on Tuesday. Recent data indicates that Spanish inflation has surged to more than double the European Central Bank’s 2 percent target, while France’s inflation reading has also surpassed expectations. Germany will commence the wave of data on Monday, with annual price increases anticipated at 3.1 percent, marking the swiftest pace since early 2024. Italy’s result on Tuesday is anticipated at 3.4 percent, marking the highest figure there in nearly three years. In Germany, factory orders for July are set to be released on Friday, with expectations from economists indicating a continuation of gains for a third consecutive month. Few appearances are scheduled by ECB policymakers, and following Wednesday, they will enter a pre-decision quiet period ahead of their meeting the subsequent week. Switzerland’s latest inflation report is set to be released on Thursday, with economists anticipating a modest increase to 0.5 percent.
That remains comfortably within the 0-2 percent range aimed for by the Swiss National Bank, and is also below its projection for the current quarter. In the UK, Bank of England Governor Andrew Bailey is scheduled to speak in London on Friday, coinciding with the release of his institution’s Decision Maker Panel report, which highlights companies’ inflation expectations. In West Asia, data on Monday are anticipated to reveal that Turkey’s economy grew by 2.5 percent year-on-year in the second quarter, and by 1 percent on a quarterly basis, indicating a strong recovery despite elevated rates. On Thursday, it is anticipated that Turkish inflation will have moderated to 31.6 percent in August, with the monthly rate potentially declining to below 2 percent. The releases come ahead of the central bank’s Sept. 10 rate decision, during which policymakers may contemplate an additional reduction in borrowing costs. In Israel, the central bank is poised to implement a third consecutive rate cut on Tuesday, bringing the rate down to 3.25 percent. Still, some analysts see the case for a pause. Citigroup posits that “in the absence of any urgency,” policymakers may choose to maintain current rates. Brazil is set to become a focal point in the region as it releases new economic data, notably a second quarter gross domestic product figure, in the lead-up to its closely contested elections in October. Tuesday’s GDP figures are anticipated to reveal that Latin America’s largest economy has experienced a decline in momentum during the second quarter, as double-digit rates exert pressure on growth.
Economics anticipates a 0.4 percent quarterly increase, a figure that could strengthen the argument for an additional rate cut in September following the recent easing of inflation into the target range earlier this month. However, it would also serve as a cautionary note to President Luiz Inacio Lula da Silva, whose attempts to invigorate the economy are struggling amid his reelection campaign. The day prior, Brazil’s central bank will publish budget balance and debt-to-GDP data, figures that are drawing attention from investors anxious about how the next government will approach the nation’s deteriorating public accounts. Industrial production data on Wednesday will offer further insight into the robustness of Brazil’s economy. Trade balance data for August will be released on Friday, marking the first comprehensive assessment following the implementation of new US tariffs on a variety of goods that commenced in late July. On Monday, Chile is set to release a range of statistics, encompassing July’s industrial output and copper production figures. It will publish economic activity readings for the month on Tuesday, following an unexpected stagnation in GDP during the second quarter. Peru is set to release its inflation data for August on Tuesday, with projections indicating that the annual figure is likely to have increased beyond the central bank’s target. Policymakers maintained interest rates earlier this month, anticipating that the recent inflation surge will be transitory. However, the El Nino climate phenomenon is intensifying worries regarding the economic outlook.
