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September’s U.S. Dept. of Labor jobs report hits markets on Friday. As usual, this report is the dominant trading event to this Global Week Ahead. Economists forecast a Sept. gain of +160K jobs and a U.S. unemployment rate of 4.8%.
Each month, jobs remain core to any U.S. macro fundamental update. These particular September job numbers arrive in front of the U.S. presidential election held on Nov. 9th. On top of that, recent U.S. Fed minutes indicated the FOMC could vote short-term rates up 25 basis points on Dec 14th.
That means this: we have one more monthly jobs report (on Nov. 4th) before the presidential election hits, and 2 monthly jobs reports before a data-dependent Fed makes its final call for 2016.
In 9 months of 2016, U.S. jobs readings averaged +182K a month. That’s slower than 2015’s +229K. However, it’s ample. This durably supports readings of +2% real U.S. GDP growth. Below +150K – a level that roughly eats up annual growth in the 160 million U.S. civilian labor force -- is where economists begin to worry out loud.
What other effects come with +182K a month in U.S. job adds?
The 4.9% U.S. unemployment rate goes sideways -- or very slowly ticks down -- at this rate of labor demand. America started 2016 at a 4.9% rate. The healthy 4.9% status of the entire U.S. hiring system has put decent +2.4% annual wage gains into hourly U.S. paychecks in 2016. Finally, a solid number of discouraged U.S. job seekers got drawn back into the workforce.
We have seen single-digit annual stock index returns in this environment. That’s a subdued scene for equities -- in annual terms -- but consistent with modest gains seen in annual payroll reports. Don’t expect more than you can ask for.
If you are a par golfer, and hit a par on the latest hole, then you can safely say you are holding your own. You are also certainly not going to get a surprise phone call to play in the next Ryder Cup.
The same can be said for the U.S. economy and stocks.
Fresh Zacks #1 Rank stocks—
(1) Tyson Foods (TSN - Analyst Report) is a U.S. poultry producer with a $27 billion market capitalization. The Zacks VGM score is an A too. My colleague Tracey Ryniec featured the stock as a Zacks Bull of the Day on Sept. 27th.
(2) Netapp (NTAP - Analyst Report) is a U.S. provider of innovative data management solutions. These simplify the complexity of storing, managing, protecting, and retaining enterprise data. The stock has a $10 billion market cap. The Zacks VGM score is an A, too.
(3) TDK Corp (TTDKY - Snapshot Report) is back to a Zacks #1 Rank. This Japanese electronic components maker has been consistently making the top Zacks Rank list for some time. TDK technologies can be found in multimedia, video, television, personal computers, mobile communications and semiconductors.
Key Global Macro indicators—
The IMF kicks off a week of meetings in Washington, DC on Wednesday, and releases its latest World Economic Outlook.
Friday U.S. jobs and unemployment data is the big event. On U.S. non-farm payroll weeks, nothing else matters. It looks like Sept. job additions are solid, once again. Friday also has three Fed speakers up in Washington DC (at the IMF), and two Fed speakers elsewhere. That looks to be the other important item on the world’s agenda.
On Monday, Indonesia’s consumer inflation rate came in at +3.07% y/y.
In Turkey, the consumer inflation rate came in at +7.28% y/y, while the manufacturing PMI came in at 48.3. That’s not bad for a country after a coup.
We got manufacturing PMIs in Europe in. The composite final manufacturing PMI was unchanged at 52.6. This means sober GDP growth for Europe.
However, the UK’s CIPS/Markit manufacturing PMI rose to 55.4 from 53.4.
- Spain’s manufacturing PMI rose to 52.3 from 51 in a prior reading.
- Italy’s manufacturing PMI rose to 51 from 49.8 in a prior reading.
- France’s manufacturing PMI rose to 49.7 from 49.5 in a prior reading.
- Germany’s manufacturing PMI has stayed flat at 54.3 from 54.3.
In comparison, the U.S. ISM manufacturing index looks to be 50.5 after a prior 49.4 reading. For Mexico, their manufacturing PMI looks the same at 50.5.
On Tuesday, Australia’s central bank, the RBA, holds an interest rate meeting, and should keep their overnight rate at 1.5%.
India’s central bank should keep their policy repo rate at 6.5%.
Brazil’s industrial production looks poor at -5% y/y, worse than the prior -6.6%.
On Wednesday, the Chicago Fed’s Evans speaks in Auckland, New Zealand. The Fed’s Kashkari speaks in Minneapolis. The Fed’s Lacker speaks in Huntington, Indiana.
Juncker and Tusk speak at the EU parliament.
The composite final PMI for Europe should be 52.6, with Eurozone services at 52.1. France’s final services PMI should be 54.1 and Germany’s should be 50.6.
The Markit PMI composite for Brazil should be 45, which is weak.
The US non-manufacturing PMI should be 54 from a prior 51.4. That’s a bounceback.
The U.S. private ADP employment survey should show +170K jobs added.
On Thursday, the Greek unemployment rate should be 23.4%.
U.S. initial claims look great at 255K.
On Friday, the Brazil IBGE inflation rate looks to be 8.61%, which is lower than the prior 8.97%, but a long way from the target of 4.5%.
The Fed’s Fischer, George, and Brainerd speak in Washington and the Fed’s Mester speaks in NYC, and the Fed’s Daly speaks in Phoenix. The BoC’s Wilkins speaks in Washington, too.
U.S. non-farm payrolls should be +160K, with U.S. unemployment at 4.8%
Canada’s unemployment rate should be 6.9%, for comparison purposes.