Volatility continues on this last day of August as investors digest Federal Reserve Vice Chair Stanley Fischer’s commentary over the weekend in Jackson Hole, Wyoming. Fischer spoke in a prepared speech Saturday and discussed inflation, the economy and the timing for a Fed rate hike. His commentary was quite hawkish, indicating he is relatively satisfied with the forward outlook on inflation, and that a September rate hike was still a likely path.
Fischer stated “there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further,” and that he is less worried about current inflation as being a reason to hold off. This doesn’t necessarily mean that a September hike is a given at this point, but certainly increases its likelihood and supports the theory that the Fed is going to make their decision on rates without being swayed by current inflation levels, recent global economic developments or low commodity prices.
Of course, as mentioned multiple times, the issue isn’t with raising rates one time, but instead on the rate of change after the initial increase. We didn’t get much clarity from Fischer on that end, so this isn’t spooking markets too much just yet. Equity futures traded lower overnight and into this morning, with the DJIA down around 100 points and the S&P down 10.
All Eyes on the August Non-Farm Payrolls Report
The week ahead isn’t loaded with pertinent economic data releases, but we get the all-important non-farm payrolls report (NFP) for August this Friday. With the labor market continuing to be the shining light on the economy and with this report being the final one prior to the September FOMC meeting (with the two-day meeting concluding with the Fed rate decision on Sept. 17), it will be watched very closely.
Fischer’s commentary on Saturday also mentioned that the Fed still wants to see “some” more improvement on the labor market prior to raising rates, so it appears the NFP print this Friday will need to beat expectations in order to push the Fed forward. However, the language on the definition of “some” improvement continues to be vague.
The NFP forecast is currently set at +220,000 new jobs after 215,000 jobs were added in July. The unemployment rate is expected to drop to 5.2%, and average hourly earnings are expected to rise 0.2% month-over-month to hold the 2.1% year-over-year rate seen last month. Will matching these numbers be enough to make the Fed move? The report will be released at 8:30 a.m. Eastern on Friday morning.
Other highlights on the economic calendar this week include: data on the Chicago PMI, or business barometer index, released Monday morning, which came in flat versus expectations at 54.4; ISM and manufacturing releases for August this Tuesday; ADP employment change, nonfarm productivity and factory orders Wednesday; and Challenger job cuts, initial jobless claims, and Markit composite and services PMI numbers on Thursday. There are no pertinent government auctions scheduled for this week.
Economic calendar for the week of 8/31 through 9/4 below (courtesy of the FNMA trading desk):
|08/31/15 09:00||ISM Milwaukee||Aug||50||47.67||47.12||—|
|08/31/15 09:45||Chicago Purchasing Manager||Aug||54.5||54.4||54.7||—|
|08/31/15 10:30||Dallas Fed Manf. Activity||Aug||-3.8||-15.8||-4.6||—|
|09/01/15 09:45||Markit US Manufacturing PMI||Aug F||52.9||—||52.9||—|
|09/01/15 10:00||Construction Spending MoM||Jul||0.60%||—||0.10%||—|
|09/01/15 10:00||IBD/TIPP Economic Optimism||Sep||47.5||—||46.9||—|
|09/01/15 10:00||ISM Manufacturing||Aug||52.5||—||52.7||—|
|09/01/15 10:00||ISM Prices Paid||Aug||39||—||44||—|
|09/01/15||Wards Domestic Vehicle Sales||Aug||13.70M||—||13.92M||—|
|09/01/15||Wards Total Vehicle Sales||Aug||17.30M||—||17.46M||—|
|09/02/15 07:00||MBA Mortgage Applications||28-Aug||—||—||0.20%||—|
|09/02/15 08:15||ADP Employment Change||Aug||200K||—||185K||—|
|09/02/15 08:30||Nonfarm Productivity||2Q F||2.80%||—||1.30%||—|
|09/02/15 08:30||Unit Labor Costs||2Q F||-1.00%||—||0.50%||—|
|09/02/15 09:45||ISM New York||Aug||—||—||68.8||—|
|09/02/15 10:00||Factory Orders||Jul||0.90%||—||1.80%||—|
|09/02/15 10:00||Factory Orders Ex Trans||Jul||—||—||0.50%||—|
|09/02/15 14:00||U.S. Federal Reserve Releases Beige Book|
|09/03/15 07:30||Challenger Job Cuts YoY||Aug||—||—||125.40%||—|
|09/03/15 08:30||Initial Jobless Claims||29-Aug||275K||—||271K||—|
|09/03/15 08:30||Continuing Claims||22-Aug||2250K||—||2269K||—|
|09/03/15 08:30||Trade Balance||Jul||-$43.00B||—||-$43.84B||—|
|09/03/15 09:45||Markit US Composite PMI||Aug F||—||—||55||—|
|09/03/15 09:45||Markit US Services PMI||Aug F||55||—||55.2||—|
|09/03/15 09:45||Bloomberg Consumer Comfort||30-Aug||—||—||42||—|
|09/03/15 10:00||ISM Non-Manf. Composite||Aug||58.4||—||60.3||—|
|09/04/15 08:30||Change in Nonfarm Payrolls||Aug||220K||—||215K||—|
|09/04/15 08:30||Two-Month Payroll Net Revision||Aug||—||—||—||—|
|09/04/15 08:30||Change in Private Payrolls||Aug||208K||—||210K||—|
|09/04/15 08:30||Change in Manufact. Payrolls||Aug||5K||—||15K||—|
|09/04/15 08:30||Unemployment Rate||Aug||5.20%||—||5.30%||—|
|09/04/15 08:30||Average Hourly Earnings MoM||Aug||0.20%||—||0.20%||—|
|09/04/15 08:30||Average Hourly Earnings YoY||Aug||2.10%||—||2.10%||—|
|09/04/15 08:30||Average Weekly Hours All Employees||Aug||34.5||—||34.6||—|
|09/04/15 08:30||Underemployment Rate||Aug||—||—||10.40%||—|
|09/04/15 08:30||Change in Household Employment||Aug||—||—||101||—|
|09/04/15 08:30||Labor Force Participation Rate||Aug||—||—||62.60%||—|