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What will the US jobs data show?
US hiring is expected to have slowed again in September, which could help make the case for the Federal Reserve continuing to keep interest rates on pause.
The labour department is forecast to report on Friday that the US added 150,000 jobs in September, according to economists polled by Reuters, down from the 187,000 added in August. The unemployment report is expected to have dipped to 3.7 per cent from 3.8 per cent.
The data will be a crucial part of the Fed’s calculus as it assesses the current state of the US economy and the appropriate course of monetary policy. The central bank last month kept interest rates on hold at the current range of 5.25 to 5.5 per cent, after lifting rates by a quarter-point in July.
But analysts and economists are split on whether the Fed will raise rates again this cycle. A cooler jobs number may lower the chances of another rise.
The Fed’s recent message that interest rates will stay “higher for longer” rocked global markets over the past two weeks, so investors will also be watching carefully as the weigh up the prospects for rate cuts over the coming year. Kate Duguid
Will oil rise to $100 a barrel?
Crude oil prices touched a fresh 10-month high this week and edged closer towards the $100 dollars a barrel mark, driven by tight supply and falling US inventories.
Brent crude, the international benchmark, breached $97 dollar a barrel for the first time since November 2022, while the US equivalent West Texas Intermediate went above $95 dollars per barrel. Despite later retreating slightly, both recorded weekly gains of around 2 per cent.
Oil prices have risen more than 30 per cent since June after Saudi Arabia and Russia extended their voluntary production and export cuts until the end of the year.
The rise continued this week after a report by the Energy Information Administration showed that US commercial crude oil inventories fell by 2.2mn barrels from the previous week, while, at the delivery point for WTI, inventories fell to the lowest point in more than a year.
Analysts accept there is a chance of oil prices rising further in the coming months, but doubt the extent to which this would affect central banks’ plans for future interest rates policy as they strive to bring inflation back to the 2 per cent target.
“If oil prices remain between $95 and $100 dollars a barrel over the next couple of months, the risk is that headline inflation in the US . . . goes back up,” said Kingswood Group chief economist Rupert Thompson.
“It’s not the main concern, because as we all know they focus on core inflation,” he said. “But central banks are all saying the same thing — that rates might have peaked, but they are data dependent and there are still risks they will have to do another one rise.
“If oil prices move up, it just increases the chances that they are actually pushed into doing that.” Daria Mosolova
Is the eurozone labour market holding up?
Investors will scrutinise a clutch of eurozone economic data next week for the latest clues on the persistence of underlying price pressures.
The eurozone labour market has shown resilience during the surge in prices and borrowing costs over the past two years, a trend many economists expect will continue in the months ahead.
The unemployment rate in the euro area is forecast to stay at the record low of 6.4 per cent struck in July when data for August is released on Monday, according to economists polled by Reuters.
“The labour market remains resilient despite stagnating growth,” said Sven Jari Stehn, economist at Goldman Sachs. He expects the eurozone unemployment rate could “decrease a little further in coming months” but warned that this would mask a divergence at the country level, with Spain likely to have a much more robust employment market than Germany.
Stehn forecasts slightly lower unemployment rates than the ECB staff projections, which see joblessness settle at 6.7 per cent from next year onwards. The strength of the labour market could be a source of concern for policymakers as it could keep upward pressure on wages, resulting in greater persistence of inflation.
However, policymakers are likely to welcome the sharp reduction in producer prices forecast for August and published on Wednesday by Eurostat.
Analysts expect that the eurozone producer price index will contract at an annual rate of 11.6 per cent, following a 7.6 per cent fall in the previous month, reflecting the easing of price pressure on businesses. That decline has contributed to a sharp fall in consumer price inflation, which dropped to 4.3 per cent in September, the lowest since October 2021.
Next week, Eurostat will also publish eurozone retail sales, which are expected to show a 0.3 per cent contraction between July and August, in part reflecting consumers returning to spend more on services following the boost to goods purchases during the pandemic. Valentina Romei
Source: Economy - ft.com