Wall Street investors are gearing up for their version of Hell Week — a torrent of jobs data coming over the next few days could easily lead to volatile market swings.
The unflinching resilience of the US labor market is one of — if not the — greatest source of tension in today's economy. Federal Reserve officials have said on numerous occasions that they believe elevated inflation rates will remain sticky until employment numbers, and the pace of wage increases, shift lower. That means the Fed's already painful rate hikes are likely to continue until the job market simmers.
But it's still boiling.
In just one year, the Federal Reserve has raised interest rates from nearly zero to a range of 4.5% to 4.75% to cool the economy. Job numbers, meanwhile, have blown past expectations for the past 10 months. The labor market is stronger than ever: The US added a shocking 517,000 jobs in January and knocked unemployment down to its lowest level since 1969.
Even as mass layoffs at companies like Facebook, Google, Goldman Sachs, Intel and Microsoft dominate headlines, job openings still outnumber job seekers by nearly 2 to 1.
The Fed's response has been to keep on keeping on.
"In order to put this episode of high inflation behind us, further policy tightening, maintained for a longer time, will likely be necessary," said San Francisco Fed President Mary Daly at Princeton University on Saturday.
"Absent a substantial pickup in the share of working-age adults looking to be employed or a large change in immigration flows, labor force participation will continue to decline and worker shortages will persist, pushing up wages and ultimately prices, at least in the near and medium term," she added.
Fed Governor Christopher Waller echoed Daly's remarks last week.
"Recent data suggest that consumer spending isn't slowing that much, that the labor market continues to run unsustainably hot, and that inflation is not coming down as fast as I thought," he said.
"If those data reports continue to come in too hot, the policy target range will have to be raised this year even more to ensure that we do not lose the momentum that was in place before the data for January were released." Waller said, explaining why this onslaught of jobs data is so important to investors. If the labor market remains strong, more Fed-induced pain lies ahead.
What to expect: ADP's private payroll report for February and the JOLTS job openings, hires and quits report for January are expected Wednesday. On Thursday, Challenger, Gray & Christmas are set to release their job cuts numbers for February, and Friday brings the main show — the Labor Department's monthly employment report.
Analysts forecast that the economy added 200,000 jobs in February, a smaller number than in January but still historically high. The unemployment rate is expected to remain the same, at 3.4%, according to a consensus poll from Refinitiv.
The predicted lack of movement in the unemployment rate has had some economists raising their projections for economic growth higher.
"We're stuck in the messy middle." said Josh Hirt, senior US economist at Vanguard. "Activity has weakened in the most interest rate-sensitive sectors of the economy, but core areas are still showing resilience. We are in this in-between period where the impact of rates has not fully worked through the economy."
Hirt said he expects the unemployment rate will likely climb from its current 54-year low, albeit slowly and modestly, to around 4.5% to 5% by the end of this year.
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