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Spotlight turns to US non-farm payrolls

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The main economic event in the first week of 2022 is Friday’s report on non-farm wages in the United States, which will be closely watched by an increasingly hawkish Federal Reserve for further signs of labor market strength.

For more forward-looking observers, final readings from the December purchasing manager surveys in the US, UK and euro area will provide a clearer picture of how the latest variant of Covid-19 has affected production in industry and services.

And on Wednesday, observers will review the minutes of the December Federal Open Market Committee (FOMC) meeting for any signals on the likely timing of rate hikes in the coming months.

Non-agricultural wage bill

In the November U.S. Employment Survey, the U.S. Bureau of Labor Statistics reported that the non-farm workforce increased by 210,000, ignoring expectations that around 450,000 new jobs would be created in the penultimate month of 2021.

Unemployment continued to decline, with the annualized unemployment rate declining 0.4 percentage point to 4.2%, while the total number of unemployed declined by 6.9 million, a decrease of 542,000 per compared to the previous month.

Companies continued to hire, despite recent purchasing managers index (PMI) data indicating slower growth in the manufacturing and service sectors.

However, December data, released on Friday, is likely to arrive too early to show whether public fears about the rapid spread of the Omicron variant have had a negative impact on jobs.

Economists expect the number of new jobs created in December to rise to 400,000, with the unemployment rate falling another 0.1 percentage point to 4.1%.

Inflation watchers will look at the average hourly earnings data presented with the payroll data. After increasing 4.8% year-on-year in November, the rate should fall back to 4.1% in December.

FOMC minutes

In testimony to Congress ahead of the Dec. 15 FOMC meeting, Fed Chairman Jerome Powell admitted that it was “time to withdraw” the word “transient” as a definition of the underlying effects. US inflation.

While some of the nine committee members had already expressed more hawkish views as inflation hit decade-long highs, it was a historic moment for President Powell who – until this point – had continued to insist on the fact that “transient” effects – such as high energy prices and supply chain bottlenecks – would soon disappear and allow inflation to return to more manageable levels.

Warmongering persisted until the December 15 meeting, in which the FOMC agreed to double the pace of tapering, setting it on track to end its asset purchase program in March rather than ‘in June – thus opening the door to the possibility of a first rate hike early on. like March or May.

The minutes of this meeting will allow investors to take a much more in-depth look at the committee’s thought processes when resetting its policy and could provide bullish dollar investors with the ammunition needed to further support the US currency, being given that the point survey at the meeting suggested the possibility of three 25 basis point hikes next year.

The best of the rest

The December purchasing manager surveys will not only provide investors with a snapshot of the state of business growth in the United States, the United Kingdom and the Eurozone over the last month of 2021, but will give also an overview of the expectations of industry leaders for the coming weeks.

Preliminary reports compiled two weeks ago continued to show a trend of slowing business output, but with indices still well above the critical 50 mark that denotes economic growth. While some revisions are likely in next week’s reports, the trend is expected to remain the same.

More importantly, those interviewed in the preliminary reports remained optimistic about the outlook, with a growing sense that demand remains robust, and are hopeful that the Omicron variant of the coronavirus will prove to be less severe than previous waves of the pandemic.

Economic highlights January 3-7

Monday

  • Euro zone – Manufacturing Markit December PMI
  • United States – Markit Manufacturing PMI December
  • United States – ISM Manufacturing PMI December

Tuesday

  • United Kingdom – BRC November Store Price Index
  • United Kingdom – November consumer credit
  • United Kingdom – Markit Manufacturing PMI December
  • Germany – unemployment rate December

Wednesday

  • Euro zone – Markit services PMI December
  • United Kingdom – Markit Services PMI December
  • United States – Markit Services PMI December
  • United States – ADP Jobs Report December
  • United States – ISM PMI December Services
  • United States – FOMC Report

Thusday

  • Germany – industrial production November
  • Euro zone – retail sales November
  • Germany – CPI inflation December
  • United States – November trade balance
  • United States – factory orders in November
  • United States – total vehicle sales in December

Friday

  • United Kingdom – Halifax house prices in December
  • Germany – November trade balance
  • United Kingdom – Markit construction PMI December
  • Euro zone – business climate / economic sentiment December
  • Euro zone – CPI inflation December
  • United States – non-farm payroll in December

Read more: Click here for the full economic calendar for next week

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