Jobs report, Fed Chair Powell speaks — What to know in the week ahead

Heidi Chung
Reporter

It will be a shortened trading week, as U.S. markets are closed Monday in observance of the Labor Day holiday. While the earnings calendar remains light for the week, a couple of key events will be in focus for investors.

Market watchers will be able to gauge the health of the U.S. labor market Friday when the August jobs report is released. Economists polled by Bloomberg are expecting the U.S. economy to have added 159,000 jobs in August, down from the 164,000 added in July. The unemployment rate is anticipated to have held steady at 3.7%.

Though job gains have slowed from last year, consensus remains that the pace has still remained largely solid. “Employment growth should continue to hold up in August, giving the Fed no reason to adjust its July meeting characterization of the labor market as ‘strong,’ Wells Fargo said in a note Friday. “The six-month moving average of nonfarm gains has certainly come down, especially relative to last year’s impressive pace, but continued gradual labor market tightening has kept income and spending rising.”

Credit Suisse economist James Sweeney argued that the labor market is not immune from broader growth weakness, and thus, job gains will continue to moderate. “Job gains are slowing to a more-sustainable pace after several strong years, which should keep headline unemployment in its current range.”

In addition, Sweeney pointed out that the Bureau of Labor Statistics released its preliminary revisions for 2018-2019 employment figures. “Normally, this annual revision is small, but this year, it will subtract around 500K jobs from annual employment growth (~40k per month),” Credit Suisse wrote in a note Thursday. “This does not impact forward-looking data, but it does make the current slowdown in job gains appear to be part of a multi-year trend rather than a sharp momentum reversal.”

The August jobs report will be released this week.

Meanwhile, the Federal Reserve will be releasing its Beige Book on Wednesday and Chairman Jerome Powell will be speaking in Zurich on Friday at 12:30 p.m. ET on “Economic Outlook and Monetary Policy.”

Investors have been hyper-focused on the Fed in recent days as the September policy meeting approaches. Markets are expecting another rate cut at this month’s meeting following the central bank’s first interest rate cut in more than a decade at its July meeting.

A couple of weeks ago at the Jackson Hole conference, Powell expressed that the Fed would do what it needs in order to prolong the current economic expansion. He explained that the U.S. is facing more challenges now than it was at the Fed’s most recent policy meeting. ““The three weeks since our July FOMC meeting have been eventful, beginning with the announcement of new tariffs on imports from China,” Powell said in Jackson Hole. On Sunday, 15% U.S. tariffs were added on more than $100 billion worth of Chinese imports, as the trade war between the U.S. and China continues to rage on.

Some economists believe that the trade tensions aren’t too worrisome. “The trade dispute with China may be escalating at a rapid pace but, despite the concerns of Fed officials, there is still little evidence that this is having a significant impact on the economy,” Capital Economics wrote in a note Friday.

Nevertheless, while some firmly believe that the economy is still strong, and some believe the headwinds facing the economy should not be ignored, Powell’s speech on Friday will be closely monitored for any additional insight into what the Fed’s assessment of the current economic situation is, as it plots its next policy move.

Economic calendar

Monday: Markets closed in observance of Labor Day

Tuesday: Markit US Manufacturing PMI, August final (50.0 expected, 49.9 in July); ISM Manufacturing, August (51.2 expected, 51.2 in July); ISM Prices Paid, August (46.8 expected, 45.1 in July); Construction Spending month-on-month, July (0.3% expected, -1.3% in June)

Wednesday: MBA Mortgage Applications, week ended August 30 (-6.2% prior); Trade Balance, July (-$53.4 billion expected, -$55.2% in June)...FED BEIGE BOOK

Thursday: ADP Employment Change, August (146,000 expected, 156,000 in July); Initial Jobless Claims, week ended August 31 (215,000 expected, 215,000 prior); Continuing Claims, week ended August 24 (1.688 million expected, 1.698 million prior); Markit US Services PMI, August final (51.0 expected, 50.9 in July); Markit US Composite PMI, August final (50.9 in July); Factory Orders, July (1.0% expected, 0.6% in June); Durable Goods Orders, July final (2.1% expected, 2.1% in June); Durable Goods excluding Transportation, July final (-0.4% expected, -0.4% in June); ISM Non-Manufacturing Index, August (54.0 expected, 53.7 in July)

Friday: Change in Nonfarm Payrolls, August (159,000 expected, 164,000 in July); Unemployment Rate, August (3.7% expected, 3.7% in July); Average Hourly Earnings year-on-year, August (3.1% expected, 3.2% in July); Labor Force Participation Rate, August (63.0% prior)

Earnings calendar

Monday: Markets closed in observance of Labor Day

Tuesday: N/A

Wednesday: American Eagle Outfitters (AEO) ahead of market open; MongoDB (MDB), Palo Alto Networks (PANW), Slack (WORK) after market close

Thursday: DocuSign (DOCU), Lululemon (LULU), PagerDuty (PD), Zoom Video Communications (ZM) after market close

Friday: N/A

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Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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