Traders will drown in big data this week.
Not the kind ChatGPT leverages to churn out “new” Hemingway+. Rather, the usual first-of-the-month top-tier releases from the US.
Ostensibly, crucial labor market updates will help refine an ambiguous macro narrative, but in all likelihood, we’ll be just as confused after this week as we were before it, if not more so.
The world’s largest economy probably added 175,000 jobs in April, economists suspect. That’d mark another strong performance even as the pace of job creation continues to slow.
The unemployment rate is seen at 3.6%. Recall that the jobless rate ticked back down to 3.5% in March, which might as well have been the lowest in 70 years.
This has a Groundhog Day feel to it. It’s just month after month of robust NFP headlines and rock-bottom unemployment rates that together suggest the labor market is operating well beyond standard definitions of “full employment.”
Average hourly earnings are seen growing 0.3% MoM. That print will be watched closely in the context of last week’s hotter-than-anticipated ECI report. Wage growth is still a mile above levels generally thought to be consistent with stable prices.
Note that substantially all of the cohorts monitored by the Atlanta Fed’s wage tracker have seen pay growth inflect higher. It isn’t a coincidence the core inflation has likewise inflected.
As discussed at some length in the May FOMC preview, the bottom line is that the Fed needs to cool the labor market. It’s serving to embed inflation across the economy. Traders will have the Fed decision in hand prior to the release of the jobs report.
On Tuesday, the JOLTS release will offer a snapshot of job openings on the last business day of March. Recall that the February vintage of the report showed openings finally dropped convincingly. A near five-sigma miss (versus consensus) bolstered whatever’s left of the soft landing case.
The ratio policymakers watch closely (i.e., openings to the number of Americans counted as officially unemployed) fell to 1.67 in that release, the lowest since November of 2021. The Fed will be hoping (praying, even) for an encore.
Sandwiched between JOLTS, ADP, the FOMC decision and NFP is an update on unit labor costs and productivity for Q1. Don’t underestimate that release. Like the ECI report, it’s often underappreciated, but it’s important to the macro narrative. Revised data released early last month showed ULC rose at nearly triple the initially reported rate+ during Q4, while productivity was revised lower. That’s not what you want in any macro environment, let alone this one.
Meanwhile, ISM surveys for April will almost surely underscore a bifurcated economy where the services sector continues to steam ahead while manufacturing struggles. ISM manufacturing prints of 45 or lower are almost synonymous with recessions, and we’re almost there. Hot services sector activity has become synonymous with inflation, and services activity is generally brisk. Put the two together and you get stagflation.
The refunding announcement is on deck too. “Along with the auction sizes themselves, the market will be eager [for] any more official communication on the debt ceiling and the potential for a buyback program to be rolled out in the medium-term,” BMO’s Ian Lyngen and Ben Jeffery noted. “Given the frequency of the Treasury Department’s inquiries, we expect a program of some form will be rolled out before the end of the year.”
Also on the docket: Challenger job cuts, an update on consumer credit and the May ECB meeting, at which Christine Lagarde will surely hike by 25bps.
