This’ll be a huge week on the macro-market front.

There’s a Fed meeting, of course, but that’ll likely be the least exciting — and the least tradable — development.

The marquee macro event’s obviously the July jobs report in the US. We’re at, or near, an inflection point for the world’s largest economy. At some point, the NFP headline will come up negative and the game will change. That almost surely won’t be this week, but it’s coming. Sooner or later. July, you’ll note, marks one year at terminal for the Fed.

Economists collectively expect to hear the US economy added 185,000 jobs in July. That’d mark a slight deceleration from June’s pace. Recall that the June headline topped estimates, but revisions subtracted 111,000 from the prior two months, bringing the three-month moving average to 177,000, the lowest since January of 2021.

A consensus print for July (and naively assuming no revisions), would push the rolling three-month pace up meaningfully to 207,000, as April’s low print drops out of the sample.

The labor market’s a lagging indicator, but a 200,000 monthly average pace for job gains hardly screams “Cut rates!” Market participants will eye the household survey closely. The disparity between the two surveys remains topical, and it’ll become even more so assuming it persists as the cycle ages.

With the Sahm rule now very close to triggering, the macro crowd will key on the jobless rate. It’s 0.7ppt off the cycle low at 4.1% and is seen holding there for July.

If the UNR ticks up to 4.2%, the Sahm rule triggers. I think.

One person who’s often missing from debates about the Sahm rule is Claudia Sahm. I think I know why the macro community — and particularly “brand name” economists and policymakers, former and current — sometimes acts as though the rule’s namesake isn’t still among the living, let alone available for comment. But I don’t want to get into that discussion. Suffice to say Claudia caused a stir a few years ago. Relatedly, the US macrosphere’s permeated by noxious machismo (ridiculous considering economists aren’t exactly tough guy types). Male practitioners are loath to credit a woman for one of the profession’s more famous rules of thumb, even when that rule’s named for that woman. Sahm did turn up on Fox News recently, an invitation she probably should’ve turned down, in my humble opinion. She’s a Progressive and Fox is… well, Fox.

Anyway, Claudia writes a Substack. She weighed in on her rule (and it is hers) in a recent post. Here’s what she had to say:

One more increase in the unemployment rate would trigger the rule, suggesting that we are in the early months of a recession. That would almost certainly be wrong. A recession is a “significant decline in economic activity spread across the economy.” It’s hard to see the signs broadly now. What is the Sahm rule missing now? Dramatic shifts in the labor force, including the plunge in participation early in the pandemic and then the jump in immigration in recent years, are likely affecting the change in the unemployment rate in a way that would not be typical in prior business cycles. The Sahm rule is currently sending the right cautionary message about the labor market cooling, but the volume is too loud. The swing from labor shortages caused by the pandemic to a burst in immigration is magnifying the increase in the unemployment rate. At the same time, the demand for workers is softening. A recession is not imminent, but the risks of a recession have risen.

As a quick aside: I’ve tried (twice if I recall) to reach out to Claudia, but to no avail. She’s an important voice, I think, in the macro-policy discussion.

Prior to the jobs report, markets will get a bevy of other labor market updates including ADP private payrolls (seen at 165,000) and a “fresh” (a misnomer in the context of the JOLTS report) read on job openings. The openings to unemployed ratio is back to pre-pandemic levels.

The metric illustrated above is (or was) key for the Fed. It was a real-time indicator for the viability of the “immaculate disinflation” thesis. In aggregate, job openings are still elevated, but as the figure shows, one of the key pandemic-era funhouse distortions has now largely “resolved,” and it did so without a sharp, let alone rapid, rise in the jobless rate.

Crucially, this week brings an update on the Fed’s favored gauge of worker compensation. The Employment Cost Index for Q2 is due on Wednesday, a few hours before Jerome Powell’s press conference. It was a warm read on the ECI that prompted Powell’s original hawkish pivot in late 2021.

On its own, and at this point in the cycle, a super-hot print wouldn’t derail the Committee’s plans for a cautious start to rate cuts in September. But the Fed doesn’t want a big overshoot on the ECI headline. Upside to the ECI readings is a wage-price canary, and there’s a correlation between some of the ECI series and the quit rate in the JOLTS release.

Recall that Q1’s ECI headline was the quickest since 2022. Consensus is looking for 1% for Q2.

In addition to the jobs data and ECI, traders will get the first estimate of unit labor costs and productivity for Q2. Don’t sleep on those figures: They’re key.

The docket also includes updates on the national home price gauges (Case-Shiller and FHFA), pending home sales, Conference Board Confidence and, of course, ISM manufacturing, which is expected to print in contraction territory for a fourth straight month and a 20th in 21.

If that’s not enough to contend with, the US rates market will be compelled to parse the Treasury borrowing estimate and refunding details (note that the market’s obsession with the QRA has faded), while the equities crowd will trade earnings from Amazon, Apple, Meta and Microsoft. Oh, and the BoJ and BoE meet too.