Is the US jobs market still booming?

Is the US jobs market still booming?

A barnstorming US jobs report in January upended markets and expectations of just how far the Federal Reserve would have to go to cool the economy. February’s figures, due out on Friday, will show whether January’s hiring spree was an aberration or part of a broader pattern that could worry officials.

The Department of Labor is expected to report that the US added 215,000 jobs in February, according to economists polled by Bloomberg, a big step down from the 517,000 added in January. A surprise is possible, however — the January figure was nearly triple forecasts.

The unemployment rate is expected to remain at 3.4 per cent, the lowest level in more than 50 years. Average hourly earnings are also forecast to have stayed even, at 0.3 per cent.

The data will be an important ingredient of the Fed’s meeting later in March to determine its next policymaking step. The central bank last month slowed the pace of its monetary tightening, lifting interest rates by 0.25 percentage points after a series of 0.75 and 0.5 percentage point raises last year. While the Fed is widely expected to raise rates by 0.25 percentage points again in March, the jobs data will affect how many more rises will come after March.

A strong jobs market typically suggests higher wages, which are one source of inflation. The jobs data, however, is just one piece of the growing evidence that inflation has re-accelerated in the US. Both the consumer price index and the personal consumption expenditures price index rose by more than expected in January. Kate Duguid

Might Kuroda pull a surprise at his last BoJ meeting?

Markets are adjusting to the idea of the academic Kazuo Ueda taking over as the new governor of the Bank of Japan next month. But speculation is mounting that the surprise-loving incumbent, Haruhiko Kuroda, could deliver a parting shot at his final monetary policy meeting this week.

The chief focus is on the potential for an adjustment to the BoJ’s yield curve control policy (YCC) — the mechanism by which the central bank has attempted to fix the level of 10-year Japanese government bonds, but, in so doing, has drained much of the liquidity from that part of the market.

Some investors expect significant adjustments to YCC early in Ueda’s term, while others see the prospect of it being abandoned altogether. In the short term, however, the BoJ could perform a small adjustment of the policy band.

In December, very much to the surprise of markets and out of keeping with the resolutely dovish tone of his previous comments, Kuroda tweaked the YCC to widen the scope for 10-year rates to fluctuate around the targeted level.

Takeshi Yamaguchi, chief Japan economist at Morgan Stanley MUFG Securities, puts the chances of a similar move by the BOJ this week at only 20 per cent: not especially likely given that the risks of extreme yen weakness seem to have receded.

“The intent of cleaning up a room before handing it over to a new inhabitant might inadvertently create new problems for the next person,” said Yamaguchi. “For example, the market has not fully factored in a March YCC revision, and a sudden revision runs the risk of causing adjustment in the stock market and yen appreciation.” Leo Lewis

How much did the UK economy expand in January?

The UK economy is expected to have marginally expanded in January, partially recovering from the contraction registered in December, but continuing the underlying weak trend seen throughout last year.

Economists polled by Reuters expect the data released on Friday to show that gross domestic product grew 0.1 per cent in January, after shrinking 0.5 per cent the previous month.

Ellie Henderson, an economist at Investec, does not expect “the economic picture to have brightened materially in January”. She anticipates that “the services industry failed to fully recover the losses from December, with industrial action in both transport and education likely to have weighed on the sector”.

Despite a 10 per cent rise in general practitioner appointments already reported, she expects services output to have expanded only 0.3 per cent in the month.

Analysts predict a 0.2 per cent fall in manufacturing production.

In the three months to January, the economy is forecast to have stagnated, reflecting the impact of high inflation and rising borrowing costs on household finances and business activity. UK output has yet to regain the level it reached in the fourth quarter of 2019, before the pandemic, making it an outlier among G7 countries.

The UK economic outlook had brightened in recent weeks due to the recent fall in wholesale energy prices, but 2023 remained “a challenging economic environment”, said Henderson. She expects the economy to contract 0.5 per cent this year. Valentina Romei