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US jobs


Here are the week’s key events:

With the Fed seen on pause ahead of its meeting of Dec 12-13th and the market now pricing in a likelihood of cuts in H1 next year, this week’s jobs data will be of crucial importance to market expectations and the path for bond yields and stocks. Jolts job openings and ADP numbers come ahead of Friday’s nonfarm payrolls survey. Elsewhere, the Reserve Bank of Australia and Bank of Canada hold monetary policy meetings, with both expected to leave rates on hold. 



The Bank of Japan remains something of a wildcard in the world of developed market central banks. The process of exiting yield curve control has been painfully slow but soon accelerate – the BoJ loves to act around Christmas. So this week’s Tokyo core CPI inflation data will be closely watched – the BoJ has repeatedly said it will exit negative rates once inflation is sustainably on track to meet its target. Tokyo Oct core CPI was up 2.7% year-on-year, vs the forecast +2.5%, whilst the core-core index was up 3.8% y/y. Elsewhere, the week kicks off with some Swiss inflation data and US factory orders – though all eyes are on the US labour market reports later in the week.  



The Reserve Bank of Australia may pause again after raising rates 25bps in November. Lat month the central bank indicated it may not seek to raise again, refraining from repeating a phrase in October statement that “some further tightening of monetary policy may be required”. Australia’s Inflation for October gives the RBA reason to pause, with it slowing to 4.9% from 5.6% last time and against a forecast 5.2%. Later in the US session we get the latest ISM services PMI and the Jolts job openings report, which has proved consistently resilient even if it’s cooled a bit of late. 



The day kicks off with Australian GDP numbers, UK construction PMI data and German factory orders for a smattering of fairly middling economic data. Weakening growth and labour market trends indicate the Bank of Canada will remain on pause when it convenes for its last monetary policy decision of the year. Meanwhile the ADP jobs report will offer some kind of foretaste of the nonfarm payrolls at the end of the week. Also look to a 10yr bond auction in the uS. 



More on the jobs front comes by way of the US weekly unemployment claims data. This has failed to really show meaningful cracks in the labour market so far, but are Fed rate hikes starting to have an effect? Recently we saw the highest continuing claims since Nov 2021, which pointed to businesses not hiring but - with initial claims not really doing anything beyond the 200k level - also not really firing much either. UK house price data will be one to watch for the homebuilder stocks. 



It’s jobs day! A month ago, the data was confirmation bias for many that the Fed is done. Nonfarm payrolls increased by 150,000 in October, whilst the previous month was revised down quite a bit. The NFP helped cement the narrative that the Fed is not only done with hikes but may be aiming to cut soon – markets have started to price in a better-than-evens chance it cuts rates by May 2024. The unemployment rate edged higher to 3.9% from 3.8% in September, while annual wage inflation softened to 4.1% from 4.3%. The report is the last major piece of economic data ahead of the FOMC’s December 12-13th meeting. 

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