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Welcome to 2022. There’s no rest for the wicked this week. We start with the key US jobs report. After the labour sector ended 2021 on a down note, will this week’s nonfarm payrolls print give us reasons to be cheerful? 

Be on the lookout for the latest Fed minutes following the FOMC’s decision to accelerate tapering as well as OPEC-JMMC meetings in the wake of higher Omicron cases worldwide. 

Nonfarm payrolls – US jobs market to start 2022 on the front foot? 

A new year brings with it a new nonfarm payrolls print. 

Friday January 7th’s release will be reporting jobs data for December 2021. Did the market end last year on a strong footing? 

When November’s jobs data was released in December, it was a disappointment. 210,000 new roles were added to the US economy during that month, coming in way below the 573,000 Dow Jones estimate. 

Even so, the unemployment rate sharply fell to 4.2% against 4.5% estimated. The labour participation force was also at its highest rate since March 2020, coming in at 61.8%. 

Interestingly, the hospitality sector saw job creation fall away in the review month. This industry has been one of, if not the, leading jobs creator across the year, but only 23,000 new hospitality and leisure positions were created in November 2021. 

That particular industry has managed to regain nearly seven million positions across the course of the pandemic. However, a 1.3 million deficit remains against February’s 2020’s numbers. The sector’s unemployment rate appears stuck at 7.5%. 

While the initial outlook for November painted a bleaker picture of stalling jobs growth, it may not be entirely accurate. We’ve seen revisions across each month so far – normally upward – and could see the same again come January. 

For example, the September and October 2021 estimates were revised upwards by a combined 82,000 positions in December. We could still see the same with January’s jobs report. 

Despite weaker-than-expected numbers, the Fed doesn’t seem put off by the tighter job section when it comes to 2022’s tapering plans…  

FOMC meeting minutes to confirm Fed outlook  

Another key release this week is the FOMC meeting minutes for December’s Federal Reserve policymaking session. 

They’ll give us more insight into what we know regarding the Fed’s 2022 plans: swifter tapering and at least three rate hikes. 

“Economic activity is on track to expand at a robust pace this year, reflecting progress on vaccinations and the reopening of the economy,” Federal Reserve chair Jerome Powell said last December. “In my view, we are making rapid progress toward maximum employment.” 

It isn’t jobs that’s providing the impetus for this ramping up of Fed activity. It’s our old friend inflation. 

US inflation stands at 6.8% at the time of writing – the highest levels for 40 years. 

In response, the Fed will accelerate the winding up of its $120bn bond-buying programme at a rate of $30bn per month starting in January. 

Then there are rate hikes. The consensus appears to be that the Fed will sanction three rate hikes in 2022, three more again in 2023, then another two in 2024. A lot of rate action to watch for. 

The timeframe for any rate changes is yet to be established, but Powell mentioned the first could come sooner rather than later. 

Speaking in December, the Fed Chair said: “The economy is so much stronger now, so much closer to full employment, inflation is running well above target and growth is well above potential. There wouldn’t be the need for a long delay.” 

The big question now is can the US digest all these changes and hikes without getting a stomachache? 

OPEC+ meets amid surging Omicron cases 

OPEC+ kicks off its first JMMC meetings of 2022 this month too. 

It’s an interesting time for the oil cartel. Just when it though it had a clear demand outlook and prices under control, the Omicron COVID-19 variant had to show up and potentially spoil the party. 

Omicron has thrown a spanner into the oil pump. Many nations are mulling over new lockdown and travel restriction measures. Some, like the Netherlands or Austria, have already entered full lockdown once more to combat the virus. 

At the time of writing, crude prices had entered into a new phase of volatility. We’re expecting a bumpy ride to close out the year. Could this new reality force a change in thinking for OPEC and its allies? 

The cartel already committed to another 400,000 bpd production hike into January at December’s meetings.  

This decision came after the US and some key crude importing allies, such as China, India, the UK, and Japan, all agreed to tap into their strategic oil reserves. As much as 60 million barrels of crude could be released onto markets through this measure – all because of rising gasoline costs in the United States. 

OPEC+ might be in a bit of a pickle. Everything the group of crude producing states has done over the past year, including its monthly output hikes, has been to tame oil price volatility.  

I don’t think we’ll end up with a situation like we did at the start of the pandemic. It’s very unlikely we’ll see the price of oil completely and utterly tank. But it is a bit of a waiting game. 

The Omicron variant is highly infectious if not necessarily more deadly than Delta or the virus’ original form. But we saw how much impact restricted movement can have on oil prices, so volatility is definitely the watchword going forward. 

Major economic data 

Date  Time (GMT)  Asset  Event 
Tue 04-Jan  All Day  All  OPEC-JMMC Meetings 
  3:00pm  USD  ISM Manufacturing PMI 
  3:00pm  USD  JOLTS Job Openings 
       
Wed 05-Jan  1:15pm  USD  ADP Non-Farm Employment Change 
  1:30pm  CAD  Building Permits m/m 
  7:00pm  USD  FOMC Meeting Minutes 
  3.30pm  OIL  US Crude Oil Inventories 
       
Thu 06-Jan  8:00am  EUR  Spanish Unemployment Change 
  1:30pm  USD  Unemployment Claims 
  3:00pm  USD  ISM Services PMI 
  3.30pm  GAS  US Natural Gas Inventories 
       
Fri 07-Jan  1:30pm  CAD  Employment Change 
  1:30pm  CAD  Unemployment Rate 
  1:30pm  USD  Average Hourly Earnings m/m 
  1:30pm  USD  Non-Farm Employment Change 
  1:30pm  USD  Unemployment Rate 
  3:00pm  CAD  Ivey PMI 

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