U.S. Payrolls Set the Tone for Next Fed Countdown: Economy Week

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The next Federal Reserve decision isn’t due until the end of October, but a big number this week could set the tone for the month ahead.

The jobs report on Friday will show if August’s weak hiring was a fluke, or something policy makers should really start to worry about.

“Job creation has already decelerated markedly, and diminished business confidence in recent months will exacerbate the defensive posturing among hiring managers,” Bloomberg Economics’ analysts led by Carl Riccadonna said. “Given the focus on downside risks to growth at present, the primary focal points of the jobs report will be the pace and breadth of hiring, as well as signals regarding the extent to which employment-generated income will support consumer spending over the medium term.”

In Japan, a sales tax-hike comes into effect on Tuesday, with potentially damaging consequences for the vulnerable economy.

Here’s what happened last week, click here for more from Bloomberg Economics and below is our weekly rundown of key economic events:

U.S.

In the U.S., a particularly poor non-farm payrolls release could force the Fed to finally downgrade its assessment of the labor market and consider a third straight interest-rate cut when policy makers meet at the end of October. Economists expect an increase of 145,000 after August’s 130,000 reading.

Hiring Slowdown Underway

Speaking of the U.S. central bank, Chair Jerome Powell will give opening remarks Friday at a “Fed Listens” event in Washington. It will also feature Governor Lael Brainard moderating a panel on employment and Governor Randal Quarles on the importance of price stability and low inflation.

Fed watchers will be listening for any indication of where the institution stands on not only future interest-rate cuts but also turmoil in repurchase-agreement operations. The New York Fed has been working to keep funding markets on an even keel since a spike in rates earlier this month.

• For more, read Bloomberg Economics’ full Week Ahead for the U.S.

Europe, Middle East and Africa

Less than three weeks after the European Central Bank cut rates and controversially relaunched QE, euro-area inflation numbers will probably show price growth still stuck around 1%. Purchasing Managers Indexes are also due from across the region, which will probably offer no respite from the run of disappointing economic news.

Sticking with the euro area, there are speeches from ECB Chief Economist Philip Lane, Vice President Luis de Guindos and Governing Council member Olli Rehn.

Turkey Inflation, Rates

Angola’s central bank governor has vowed more interest-rate cuts, and could start as early as a meeting on Monday. In Turkey, inflation data on Thursday may show a plunge into single digits for the first time since 2017, possibly emboldening a central bank that’s eased by a cumulative 750 basis points in its last two meetings.

• For more, read Bloomberg Economics’ full Week Ahead for EMEA

Asia

The first official reading of China’s economic performance in September comes with the PMI reports on Monday. The services gauge is expected to stay buoyant while the nation’s factories remain in the doldrums amid trade tensions with the U.S. and the return of industrial deflation eating at margins.

China Official PMI

Australia’s central bank will set interest rates Tuesday in a too-close-to-call decision. In a Sept. 24 speech, Governor Philip Lowe kept the door open to more easing but held off from any clear signal that such a move was imminent.

RBA May Extend Pause in October

Japan’s sales tax increase will kick in Tuesday -- a fresh challenge for the central bank’s quest to generate enough momentum to revive prices to the 2% inflation target.

More RBI Rate Cuts Needed to Close Output Gap

The week ends with India setting interest rates on Friday. Governor Shaktikanta Das has said there’s room for cuts to spur growth given stable and below-target inflation. He’s already lowered borrowing costs four times this year.

• For more, read Bloomberg Economics’ full Week Ahead for Asia

Latin America

Investors will watch Brazil’s industrial production data for August, due on Tuesday, to gauge the economic impact of the central bank’s aggressive monetary easing cycle. The same day, Chile’s August economic activity data may guide market expectations about the central bank’s rate cuts.

Chile Monthly Economic Activity

In Mexico, the government’s budget balance for August, due on Monday, will show whether the government is boosting spending in a bid to jumpstart the economy.

• For more, read Bloomberg Economics’ full Week Ahead for Latin America

--With assistance from Malcolm Scott and Margaret Collins.

To contact the reporter on this story: Fergal O'Brien in Zurich at fobrien@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net, Zoe Schneeweiss

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