New York·Shanghai markets…U.S. August employment report, a variable for rate cuts
Summary
- This week's U.S. employment indicators are said to be the key variable that will determine whether the central bank (Fed) will cut interest rates.
- Recent employment indicators have deteriorated, and if the August employment report is also weak, the possibility of rate cuts is expected to increase further.
- In the Shanghai market, manufacturing and services PMI releases could influence yuan strength.
New York markets are expected to be on edge this week ahead of employment data releases. These indicators are seen as a key variable in gauging whether the U.S. central bank (Fed) will cut interest rates.
The nonfarm and manufacturing employment figures and the unemployment rate to be released on the 5th are the representative related indicators. Recent employment data have deteriorated consecutively. If this figure also proves weak, the likelihood of rate cuts is expected to rise further. According to the U.S. Department of Labor, July nonfarm employment increased by 73,000, below the expected 106,000. Last month the Labor Department also sharply revised down May (144,000 → 19,000) and June (147,000 → 14,000) employment statistics. The two-month combined revision amounted to 258,000. Fed Chair Jerome Powell recently suggested the possibility of rate cuts after reviewing such indicators.
However, inflation indicators remain high. The consumer price index (CPI), producer price index (PPI), and the personal consumption expenditures (PCE) price index are not coming down easily. Therefore, if the August employment report confirms an improvement in the labor market, expectations for rate cuts could weaken.
Other major economic indicators will also be released this week. On the 2nd, the Institute for Supply Management (ISM) manufacturing purchasing managers' index (PMI) will be released; on the 3rd, the U.S. Department of Labor's job openings and labor turnover survey (JOLTS) and the Fed's Beige Book will be published. Corporate earnings reports are also scheduled: Dollar Tree on the 3rd and Broadcom on the 4th will issue reports to the market.
Meanwhile, on the Shanghai market the Caixin manufacturing PMI, a leading indicator of manufacturing activity, will be released on the 1st. The Caixin services PMI will be released on the 3rd. If these indicators beat expectations, they could act as a factor for yuan appreciation. Last month the services PMI recorded 52.6, well above the forecast (50.4), and the yuan strengthened.
Reporter Hye-in Lee hey@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
