Don't expect a blowout jobs report on Friday.
In a reversal from the double dose of downward revisions seen in September's report, Thomas Simons, an economist with Jefferies, based in New York, expects to see an upward revision to prior month's numbers in Friday's print. The economy is projected to add 185,000 jobs in October, ahead of the disappointing 142,000 nonfarm payrolls added in September, but below the psychologically important 200,000 monthly threshold. That level was once important, but becomes less symbolic as the economy approaches maximum employment, said Simons. "We've seen various Federal Reserve officials talk about a lower bar."
"We think it's possible that there are some calendar fluctuations with Labor Day timing," he added. "It was later this year than it usually is, which created some distortions that will be unwound in the next report."
But the labor market isn't the only trend to watch. Investors should also pay attention to wage growth and interest rates.
Aside from jobs, the Labor Department also will release the latest reading on average hourly earnings, which Simons expects to rise 0.2% during October, pushing the rate up by 2.4% year over year.
"That's near the top end of the range we've seen recently, but we think we're going to continue to see more gains going forward."
The October report will receive extra scrutiny as investors anxiously await the Fed's December meeting. Many economists, including Simons, expect the central bank to make its first rate hike in nearly a decade.
"The employment side of the dual mandate has been satisfied for many months," he said. "If you looked at just that, the Fed could have hiked at the end of last year, when payrolls were above 300,000 a month."
But he said low oil prices are keeping inflation low and have even started affecting core inflation, which strips out food and energy prices. The Fed's favorite measure of inflation, the core PCE, or personal consumption expenditures gauge, rose 0.2% during September and 1.3% over the past year, according to a Friday report from the Commerce Department. That's the same year-over-year growth seen in August.
Finally, if oil prices fall below $40 a barrel over the next few weeks, or if the economy adds only 100,000 to 110,000 monthly payrolls over the next two reports, it's possible that the Fed will get cold feet and delay its rate hike until March 2016.
By Scott GammIn a reversal from the double dose of downward revisions seen in September's report, Thomas Simons, an economist with Jefferies, based in New York, expects to see an upward revision to prior month's numbers in Friday's print. The economy is projected to add 185,000 jobs in October, ahead of the disappointing 142,000 nonfarm payrolls added in September, but below the psychologically important 200,000 monthly threshold. That level was once important, but becomes less symbolic as the economy approaches maximum employment, said Simons. "We've seen various Federal Reserve officials talk about a lower bar."
"We think it's possible that there are some calendar fluctuations with Labor Day timing," he added. "It was later this year than it usually is, which created some distortions that will be unwound in the next report."
But the labor market isn't the only trend to watch. Investors should also pay attention to wage growth and interest rates.
Aside from jobs, the Labor Department also will release the latest reading on average hourly earnings, which Simons expects to rise 0.2% during October, pushing the rate up by 2.4% year over year.
"That's near the top end of the range we've seen recently, but we think we're going to continue to see more gains going forward."
The October report will receive extra scrutiny as investors anxiously await the Fed's December meeting. Many economists, including Simons, expect the central bank to make its first rate hike in nearly a decade.
"The employment side of the dual mandate has been satisfied for many months," he said. "If you looked at just that, the Fed could have hiked at the end of last year, when payrolls were above 300,000 a month."
But he said low oil prices are keeping inflation low and have even started affecting core inflation, which strips out food and energy prices. The Fed's favorite measure of inflation, the core PCE, or personal consumption expenditures gauge, rose 0.2% during September and 1.3% over the past year, according to a Friday report from the Commerce Department. That's the same year-over-year growth seen in August.
Finally, if oil prices fall below $40 a barrel over the next few weeks, or if the economy adds only 100,000 to 110,000 monthly payrolls over the next two reports, it's possible that the Fed will get cold feet and delay its rate hike until March 2016.
Source: http://www.thestreet.com/story/13349436/1/watch-for-these-3-economic-barometers-on-friday.html
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