A worker takes a panini sandwich off a grill at a restaurant in the Union Market district in Washington, D.C., on Tuesday, Aug. 30, 2022.
Al Drago | Bloomberg | រូបភាព Getty
Investors are closely watching the nonfarm payrolls report due out Friday, but not for the usual reasons.
In normal times, strong job gains and rising wages would be considered a good thing. But these days, they’re exactly what the U.S. economy doesn’t need as policymakers try to beat back an inflation problem that just won’t seem to go away.
ព័ត៌មានវិនិយោគពាក់ព័ន្ធ
“Bad news equals good news, good news equals bad news,” Vincent Reinhart, chief economist at Dreyfus-Mellon, said in describing investor sentiment heading into the key Bureau of Labor Statistics employment count. “Pretty much uniformly what is dominant in investors’ concerns is the Fed tightening. When they get bad news on the economy, that means the Fed is going to tighten less.”
Economists surveyed by Dow Jones expect the report, due out Friday at 8:30 a.m. ET, will show that payrolls increased 275,000 in September, while the unemployment rate held at 3.7%. At least as important, estimates are for average hourly earnings to increase 0.3% month over month and 5.1% from a year ago. The latter number would slightly below the August report.
Any deviation above that could signal that the Federal Reserve needs to get even more aggressive on inflation, meaning higher interest rates. Lower numbers, conversely, might provide at least a glimmer of hope that cost of living increases are at least abating.
Wall Street forecasters were split on which way the surprise might come, with most around the consensus. Citigroup, for instance, is looking for a gain of 265,000, while Nomura expects 285,000.
In search of middle ground
However, worries have shifted in the market lately over the Fed doing too much rather than too little, as some indicators in recent days have pointed to some loosening of inflation pressures.
The Institute for Supply Management on Wednesday reported that its September survey showed expectations for prices around their lowest levels since the early days of the pandemic.
Recent BLS data indicated that prices for long-distance truck deliveries fell 1.5% in August and are well off their January record peak (though still up nearly 22% from a year ago).
Finally, outplacement firm Challenger, Gray & Christmas reported Thursday that job cuts surged 46.4% in September from a month ago (though they are at their lowest year-to-date level since the firm began tracking the data in 1993). Also, the BLS reported Tuesday that job openings fell by 1.1 million នេៅខែសីហា។
Correcting a mistake
Even if Friday’s number is weak, the Fed rarely reacts to a single month’s data point.
In June, the central bank was set to approve a 0.5 percentage point rate increase. But a higher-than-expected consumer price index reading, coupled with elevated inflation expectations in a consumer sentiment survey, pushed policymakers in an 11th-hour move to a 0.75 percentage point move.
That should serve as a reminder on how focused on the Fed is on pure inflation readings, with Friday’s report possibly viewed as tangential, said Shannon Saccocia, chief investment officer at SVB Private Bank.
“I don’t think the Fed is going to pivot or pause or anything of that nature before the end of the year, certainly not because of jobs data,” Saccocia said.
Next week’s CPI reading is likely to be more consequential when it comes to any shift in Fed attitudes, she added.
“Wages are embedded in the cost structure now, and that’s not going to change. They’re probably going to put more emphasis on food and housing prices in terms of their areas of interest, because all that can happen now [with wages] is we stabilize at current levels,” Saccocia said. “Any sort of lift we got out of this print [Friday] is likely to be temporary, and tempered by the perception that this is all really about CPI.”
Source: https://www.cnbc.com/2022/10/06/fridays-jobs-report-could-be-a-case-where-good-news-isnt-really-good.html