Key Events This Week: Good Friday Payrolls, JOLTS, ISM And Even More Fed Speakers

Before we look at the main events of this week, a quick recap of this weekend’s highlight: OPEC+ “unexpected”, or rather  expected by some…

Who cuts first: OPEC+ or Fed

— zerohedge (@zerohedge) March 15, 2023

… decision to cut output starting in May that will exceed 1 million barrels a day. Russia agreed to keep production at their current reduced level, while Saudi Arabia will see the largest cuts, slowing production by 500k barrels a day. The White House naturally came out strongly against the move, due to concerns with consumer prices and the inflationary effects of higher fuel costs. It will take some time to see exactly how much this impacts global prices as demand concerns linger, but as DB’s Jim Reid notes, this is another potential factor exerting upward pressure on inflation after largely being an ameliorating factors this year. As we will show shortly, oil prices fell every month for the last quarter, leading to the worst Q1 performance since 2020 when global shutdowns throttled demand. Brent crude futures are starting this quarter up +5.60% to $84.24/bbl, with WTI futures up +5.58% to $79.89/bbl after both initially were more than 8% higher at the start of trading.

So looking ahead to this week, the US jobs report on Friday (when the US and most global markets will be closed for Good Friday) should be the main focus. It will be the last jobs numbers before the next Fed meeting on May 3rd and markets will be looking for signs of cooling in the labor market after 475bps of tightening from the Fed over the last year. The report follows recent strong nonfarm payrolls beats, hotter-than-expected inflation data, and a 25bps Fed hike despite US regional bank concerns. Economists expect nonfarm payrolls to gain +240k (vs +311k in February) and the unemployment rate to remain unchanged (3.6%), while expecting hourly earnings growth to rise modestly to 0.3% from +0.2%. Prior to the Friday’s report, JOLTS (Tuesday) and ADP (Wednesday) data will also be in focus.

Today we will get a sense of how global growth evolved over the course of the month with the release of US ISM manufacturing data later on, followed by services on Wednesday. Coupled with the jobs report, whether the ISM indices also show robust growth, especially in components like employment and prices, will be key to assess economy’s resilience. Still, factors like the recent banking turmoil may not yet feed through to major economic indicators. DB’s US economists see both gauges declining from February levels (manufacturing 47.1 vs 47.7 and services 54.4 vs 55.1).

In Europe, the key data releases include trade balance (Tuesday), factory orders (Wednesday) and industrial production (Thursday) for Germany, industrial production (Wednesday) and trade balance (Friday) in France as well as retail sales and PMIs for Italy. Our European economists overview what the latest prints on those indicators, among others, say about the European economy here, providing context for this week’s readings. Going forward, they underscore the recent banking stress as a new headwind and see risks as being tilted to the downside.

The major data points out of Asia include the China Caixin PMI data and Japan Tankan indices which we highlight below along with Japanese labour cash earnings and household spending on Friday. Friday’s data are expected to show total cash earnings per worker at 0.9% YoY, up from January’s 0.8%, and real household spending down -0.2% MoM vs 2.7% in January.

Courtesy of DB, here is a aay-by-day calendar of daily events

Monday April 3

• Data: US March ISM index, total vehicle sales, February construction spending, China March Caixin manufacturing PMI, Japan Q1 Tankan indices, Italy March manufacturing PMI, new car registrations, budget balance, France February budget balance, Canada Q1 BoC business outlook survey, March manufacturing PMI
• Central banks: ECB’s Vujcic and Simkus speak

Tuesday April 4

• Data: US February JOLTS report, factory orders, Japan March monetary base, Germany February trade balance, Eurozone February PPI, Canada February building permits
• Central banks: Fed’s Mester speaks, BoE’s Tenreyro and Pill speak

Wednesday April 5

• Data: US March ISM services index, ADP report, February trade balance, UK March official reserves changes, new car registrations, Italy March services PMI, Q4 deficit to GDP, February retail sales, Germany February factory orders, France February industrial production, Canada February international merchandise trade
• Central banks: BoE’s Tenreyro speaks

Thursday April 6

• Data: US initial jobless claims, UK March construction PMI, China March Caixin services PMI, Germany March construction PMI, February industrial production, Canada March jobs report
• Central banks: Fed’s Bullard speaks

Friday April 7

• Data: US March jobs report, China March foreign reserves, Japan February labor cash earnings, household spending, France February trade balance

* * *

Finally, looking at just the US, Goldman notes that the key economic data releases this week are the ISM manufacturing report on Monday, JOLTS job openings on Tuesday, and the employment situation report on Friday. There are several speaking engagements from Fed officials, including Governor Cook and presidents Mester and Bullard.

Monday, April 3

• 09:45 AM S&P Global US manufacturing PMI, March final (consensus 49.3, last 49.3)
• 10:00 AM Construction spending, February (GS +0.2%, consensus flat, last -0.1%): We estimate construction spending increased 0.2% in February.
• 10:00 AM ISM manufacturing index, March (GS 47.3, consensus 47.5, last 47.7): We estimate that the ISM manufacturing index fell 0.4pt to 47.3 in March, reflecting the lackluster rebound in East Asian manufacturing activity and a sentiment drag from US banking stresses. Our GS manufacturing tracker edged up by 0.2pt to 47.8.
• 04:15 PM Fed Governor Cook speaks: Fed Governor Lisa Cook will discuss the economic outlook and monetary policy at an event hosted by the University of Michigan. A moderated Q&A is expected. On March 31, Cook said, “On the one hand, if tighter financing conditions restrain the economy, the appropriate path of the federal funds rate may be lower than it would be in their absence. On the other hand, if data show continued strength in the economy and slower disinflation, we may have more work to do…I am closely watching developments in the banking sector, which have the potential to tighten credit conditions and counteract some of that momentum.”
• 05:00 PM Lightweight motor vehicle sales, March (GS 14.5mn, consensus 14.6mn, last 14.9mn)

Tuesday, April 4

• 10:00 AM Factory orders, February (GS -0.7%, consensus -0.5%, last -1.6%); Durable goods orders, February final (last -1.0%); Durable goods orders ex-transportation, February final (last flat); Core capital goods orders, February final (last +0.2%); Core capital goods shipments, February final (last flat): We estimate that factory orders decreased 0.7% in February following a 1.6% decline in January.
• 10:00 AM JOLTS job openings, February (GS 10,300k, consensus 10,500k, last 10,824k): We estimate that JOLTS job openings declined to 10,300k in February.
• 01:30 PM Fed Governor Cook speaks: Fed Governor Lisa Cook will deliver pre-recorded introductory remarks at a Fed conference on economics careers. A Q&A is not expected.
• 06:45 PM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will speak at an event hosted by the Money Marketeers of New York University. Speech text and audience Q&A are expected. Mester last spoke on February 24th, noting “The inflation readings are still not where we need them to be.”

Wednesday, April 5

• 08:15 AM ADP employment report, March (GS +185k, consensus +210k, last +242k); We estimate a 185k rise in ADP payroll employment in March, reflecting softening in Big Data indicators and the persistent underperformance of ADP relative to nonfarm payrolls in recent months.
• 08:30 AM Trade balance, February (GS -$68.7bn, consensus -$68.8bn, last -$68.3bn): We estimate that the trade deficit widened to $68.7bn in February.
• 09:45 AM S&P Global US services PMI, March final (consensus 53.8, last 53.8)
• 10:00 AM ISM services index, March (GS 54.1, consensus 54.3, last 55.1): We estimate that the ISM services index declined by 1.0pt to 54.1 in March, reflecting snowier weather, a sentiment drag from banking stresses, and the pullback in our survey tracker (-1.7pt to 51.1).

Thursday, April 6

• 08:30 AM Initial jobless claims, week ended April 1 (GS 240k, consensus 200k, last 198k); Continuing jobless claims, week ended March 25 (consensus n.a., last 1,689k): We estimate that seasonal factor revisions in the upcoming jobless claims report could result in a boost as large as 40-50k to initial jobless claims if the seasonal distortions that we have highlighted over the past year (and that the BLS is aware of; see slide 23 here) are eliminated. As a result, we forecast that initial jobless claims will increase by 42k to 240k in the week ended April 1, though we note that there could be a much less meaningful upward revision if the existing residual seasonality persists.
• 10:00 AM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will discuss the economic outlook and monetary policy at an event hosted by the Arkansas State Bank Department. Speech text and Q&A with audience and media are expected. On March 28, Bullard said, “In my view, continued appropriate macroprudential policy can contain financial stress in the current environment, while appropriate monetary policy can continue to put downward pressure on inflation…Financial stress has been on the rise since [early March] in the wake of recent bank failures and turmoil. The macroprudential policy response to these events has been swift and appropriate. Regulatory authorities have used some of the tools that were developed or first utilized in response to the 2007-09 financial crisis in order to limit the damage to the macroeconomy, and they’re ready to take additional action if necessary.”

Friday, April 7

• 08:30 AM Nonfarm payroll employment, March (GS +260k, consensus +240k, last +311k); Private payroll employment, March (GS +245k, consensus +223k, last +265k); Average hourly earnings (mom), March (GS +0.35%, consensus +0.3%, last +0.2%); Average hourly earnings (yoy), March (GS +4.32%, consensus +4.3%, last +4.6%); Unemployment rate, March (GS 3.6%, consensus 3.6%, last 3.6%); Labor force participation rate, March (GS 62.5%, consensus 62.5%, last 62.5%): We estimate nonfarm payrolls rose by 260k in March (mom sa). When the labor market is tight, job growth tends to normalize in March from a strong winter pace, and Big Data employment indicators indeed decelerated in the month. We also assume a 40k drag from snowier weather in the Northeast and Midwest. On the positive side, we expect high but falling labor demand to more than offset rebounding layoffs in the information and financial sectors, and we believe the March survey week (ended March 18) was too early to reflect the impact of recent banking stresses. The March seasonal factors have also evolved favorably in recent years and represent a tailwind worth 50-100k, in our view. We estimate the unemployment rate was unchanged at 3.6%, reflecting a modest rise in household employment offset by flattish labor force participation (we estimate unchanged on a rounded basis at 62.5%). We estimate a 0.35% increase in average hourly earnings (mom sa) that lowers the year-on-year rate to 4.32%, reflecting continued but waning wage pressures and neutral calendar effects.

Source: Deutsche Bank, Goldman, BofA