By Danny Jasper, Senior Vice President, Capital Markets

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):

Date Time Event Period Surv(M) Actual Prior Revised
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%