Week Ahead-US Jobs Report, FOMC Minutes, What to Know this week
US
It will be an eventful week, the ISM manufacturing report, the fourth of July Holiday, the Fed Minutes, and the nonfarm payroll report. Wall Street is starting to believe in those Fed dot plots and this week’s economic data points may provide more evidence for the hawks. The ISM manufacturing report is expected to show activity is stabilizing. The Fed minutes will emphasize the fear that core inflation is proving to be stickier. The June US jobs report is expected to show hiring cooled from the 339,000 pace to 200,000 jobs. The unemployment rate however is expected to improve from 3.7% to 3.6%. Wage pressure is also expected to remain steady with a 0.3% increase from a month ago.
We will hear from a couple of Fed speakers this week. Williams participates in a moderated discussion at the 2023 annual meeting of the Central Bank Research Association at the New York Fed. Logan speaks on a panel about the policy challenges for central banks at the Central Bank Research Association annual meeting at Columbia University.
Strong markets, strong economy
Last week, a strong run of economic data prompted economists that had seen a recession in the first half of 2023 as a likely outcome to move back their projections.
Still, strength in the housing market, newfound confidence from consumers, and a sharp upward revision to first quarter GDP weren’t enough for economists to give the all clear for their 2023 recession watch.
“The economy has proven more resilient than we previously expected owing largely to consumption,” Bank of America US economist Michael Gapen wrote on Friday. “However, we do not expect such robust prints to continue. Momentum in the economy should slow as the lagged effects of tighter monetary policy and financial conditions start to take hold.”
Oxford economics lead US Economist Oren Klachkin admitted the strength of the consumer in the first half of the year “surprised us,” but, among other factors, sticky inflation will “leave consumers with little choice but to cut back on spending” in the latter half of the year.
“We have seen some commenters looking at the upward revision to Q1 GDP as a sign that the economy is on firmer footing than previously thought, driven by the strength of the consumer,” Jefferies economist Thomas Simons wrote.
“However, we see the strength of Q1 as setting a very high bar for continued growth in Q2 and we remain of the view that the consumer is running out of steam.”
The stock market tracked with the economy in the first half of 2023, surprising to the upside and leaving investors to wonder if the resilience can continue.
In a note last week, the team at Bespoke Investment Group highlighted stocks do better than average in the second half of the year after seeing outsized gains in the first half.
In years the S&P 500 rises more than 10% through June, the index has returned an average of 7.73% over the next six months. When the index comes into July with more modest returns, the average return is just 3.13% for the rest of the year.
Weekly Calendar
Monday
Economic data: S&P Global US Manufacturing PMI, June final (46.3 expected, 46.3 previously); Construction spending month-over-month, May (+0.5% expected, +1.2% previously); ISM Manufacturing (47.2 expected, 46.9 previously).
Earnings: No notable results set for release.
Tuesday
Markets closed for Independence Day.
Wednesday
Economic data: Factory orders, May (+0.8% expected, +0.4% previously); Durable goods orders, May final (+1.7% expected, +1.7% previously), FOMC meeting minutes, June 14.
Earnings: No notable results set for release.
Thursday
Economic data: ADP private payrolls, June (+236,000 expected; +278,000 previously); Challenger jobs cuts, year-over-year, June (+2867% previously); Weekly initial jobless claims (245,000 expected, 239,000 previously); JOLTS job openings, May (9.97 million expected, 10.1 million previously); S&P services PMI (54.1 expected); ISM services PMI (51.3 expected, 50.3 previously)
Earnings: Levi Strauss & Co. (LEVI)
Friday
Economic data: Nonfarm payrolls, June (+225,000 expected, +339,000 previously); Unemployment rate, June (3.6% expected, 3.7% previously); Average hourly earnings, month-over-month, June (+0.3% expected, +0.3% previously); Average hourly earnings, year-over-year, June (+4.2% expected, +4.3% previously); Average weekly hours worked, June (34.4 expected, 34.4 previously); Labor force participation rate, May (62.6% expected, 62.6% previously)
Earnings: No notable results set for release.
