Jobs are in focus after Powell's hawkish speech: What you need to know this week

The latest monthly jobs report is the main attraction this week as investors head into September.

August employment data from the Labor Department is expected to be released at 8:30 a.m. ET Friday morning and is expected to show another strong month for the U.S. labor market. Economists expected nonfarm payrolls to rise by 300,000 in August, according to Bloomberg data.

The figure is likely to play a key role in dictating the Federal Reserve’s next decision on interest rates at its policy meeting later this month. Investors will keep a close eye on the jobs data after Fed Chairman Jerome Powell said in a hawkish speech at the Jackson Hole Symposium on Friday he is willing to accept a softening of the labor market in exchange for a softening of inflation.

Federal Reserve Chairman Jerome Powell walks in Teton National Park, where financial leaders from around the world gathered for the Jackson Hole Economic Symposium outside Jackson, Wyoming, U.S., August 26, 2022. REUTERS/Jim Urquhart

Federal Reserve Chairman Jerome Powell walks in Teton National Park, where financial leaders from around the world gathered for the Jackson Hole Economic Symposium outside Jackson, Wyoming, U.S., August 26, 2022. REUTERS/Jim Urquhart

“If there is a conflict in the Fed’s two mandates as they work to slow inflation, Chairman Powell is putting price stability above maximum employment,” Jeff Klingelhofer, co-chief investment officer at Thornburg Investment Management, said in a note on Friday.

Powell the remarks sent markets crashingwith all three major averages settling at four-week lows on Friday.

The Nasdaq fell 3.9 percent and the S&P 500 lost 3.3 percent, with both indexes posting their biggest one-day declines since June 13. The Dow Jones Industrial Average shed 1,000 points, or roughly 3%, on Friday.

“There will very likely be some softening in labor market conditions,” Powell said in his speech.

“While higher interest rates, slower growth and softer labor market conditions will reduce inflation, they will also bring some pain to households and businesses,” Powell added. “These are the unpleasant costs of reducing inflation. But failure to restore price stability would mean much greater pain.

Until Friday, some market participants had expected that the US central bank might change its plans to tighten monetary policy, but Powell and other officials played down the possibility of tapering interest rate hikes this year.

Inflation has shown signs of slowing but remains sharply above the Federal Reserve’s 2% target. Data from the Bureau of Economic Analysis on Friday showed that consumer prices eased slightly last month, with core PCE falling 0.1% between June and July, driven mainly by a 4.8% drop in energy prices. On a year-over-year basis, core PCE rose 6.3% in July.

David Malpass, president of the World Bank Group, looks next to a stuffed grizzly bear in Teton National Park, where financial leaders from around the world gathered for the Jackson Hole Economic Symposium, outside Jackson, Wyoming, U.S., August 26, 2022. REUTERS /Jim Urquhart

David Malpass, president of the World Bank Group, looks next to a stuffed grizzly bear in Teton National Park, where financial leaders from around the world gathered for the Jackson Hole Economic Symposium, outside Jackson, Wyoming, U.S., August 26, 2022. REUTERS /Jim Urquhart

And core PCE, the Fed’s preferred gauge of inflation, rose 0.1% on a monthly basis in July and 4.6% from a year earlier, marking the slowest annual increase since October 2021.

Still, Powell indicated another “unusually large” rate hike was possible in September after the central bank raised rates by 75 basis points in June and July.

“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” Powell said. “The historical record strongly cautions against premature policy relaxation.”

Elsewhere in the labor market data, ADP will resume its private payroll reporting with a new methodology on Wednesdays after a temporary hiatus in June and July. Economists polled by Bloomberg expected the announcement to show that 300,000 private payrolls were added in August.

ADP’s monthly private jobs report comes two days before the Labor Department releases its official jobs report. While the company’s press release is an imperfect precursor to the government’s announcement, it offers a snapshot of job growth over the period.

The Job Vacancies and Labor Turnover Survey (JOLTS), Challenger job cuts and initial weekly jobless claims are also on the list of employment data to be released this week.

On the earnings side, the reporting season is largely over, but a few potentially market-moving results are still available. Retailers will get numbers from headliners including Best Buy (BBY), HP (HPQ), large lots (BIG), Chewing (CHWY), Lululemon Athletica (LULU) and Broadcom (AGO).

Economic calendar

monday: Dallas Federal Reserve Production ActivityAugust (-12.7 expected, -22.6 in previous month)

Tuesday: FHFA Home Price Indexmonth-on-month, June (0.8% expected, 1.4% in previous month); Housing Price Indexquarter over quarter, Q2 (4.6% in the previous quarter); S&P CoreLogic Case-Shiller 20-City Compositemonth over month, June (0.90% expected, 1.32% in previous month); S&P CoreLogic Case-Shiller 20-City Compositey/y, June (19.20% expected, 20.50% in previous month); S&P CoreLogic Case-Shiller US National Home Price Indexon an annual basis, June (19.75% in the previous month); Conference Board Consumer TrustAugust (97.7 expected, 95.7 in previous month); JOLTS VacanciesJuly (10.475 million expected, 10.698 million in the previous month)

Wednesday: MBA Mortgage Applicationsweek ended August 26 (-1.2% in previous week); ADP Employment ChangeAugust (300,000 expected); MNI Chicago PMIAugust (52.5 expected, 52.1 in previous month)

Thursday: Job cuts at Challengeron an annual basis, August (36.3% in the previous month); Initial unemployment claimsweek ended August 27 (249,000 expected, 243,000 in previous week); Continuing Claimsweek ended August 20 (1.450 million expected, 1.415 million in previous week); Non-agricultural productivityQ1 final (-7.5% expected, 7.5% in previous month); S&P Global US Composite PMIfinal August (51.3 expected, 51.3 in previous month); Construction costsmonth over the previous month, July (-0.1% expected, -1.1% in the previous month); ISM ManufacturingAugust (52.0 expected, 52.8 in previous month); ISM prices paidMarch (60.0 in the previous month); New ISM ordersAugust (48.0 in the previous month); ISM employmentAugust (49.9 in the previous month); WARDS General Vehicle SalesAugust (13.50 million expected, 13.35 million previous month)

Friday: Non-farm payrollsAugust (300,000 expected, 528,000 in previous month); Unemployment rateAugust (3.5% expected, 3.5% in the previous month); Average hourly earningsmonth-on-month, August (0.4% expected, 0.5% in previous month); Average hourly earningsy/y, August (5.2% expected, 5.2% previous month); Average weekly hours All employeesAugust (34.6 expected, 34.6 in previous month); Labor force participation rateAugust (62.2% expected, 62.1% in the previous month); Underemployment rateAugust (6.7% in the previous month); Production ordersJuly (0.2% expected, 2.0% in previous month); Orders of durable goodsfinal in July (0.0% expected, 0.0% in previous month); Durable goods, excluding transportfinal in July (0.3% expected, 0.3% in previous month); Orders for non-defense capital goods, excluding aircraftfinal in July (0.4% in the previous month); Supplies of non-defense capital goods, excluding aircraftfinal July (0.7% in previous month)

Earnings Calendar:

Monday: Catalent (CTLT), Select Quote (SLQT)

Tuesday: Best Buy (BBY), HP (HPQ), Ambarella (AMBA), Baidu (WILL BE), Large Lots (BIG), Chewy (CHWY) on horse (CONN), CrowdStrike (CRWD), Hewlett Packard Enterprise (HPE), Phototronics (PLAB)

Wednesday: Anaplan (PLAN), Cooper (Chief Operating Officer), Designer Brands (DBI), Donaldson (DCI), Fri Below (FRI), MongoDB (MDB), Octa (OKTA), Clean Storage (PSTG), Semtech (SMTC), Veeva systems (VEEV), Vera Bradley (VRA)

Thursday: Lululemon Athletics (LULU), Broadcom (AGO), Campbell Soup (CPB), Sienna (CIEN), Jenesco (GCO), Hormel Foods (HRL), JOAN (JOAN), Ollie’s Bargain Outlet (OLLY), SecureWorks (SCWX), Jeweler’s stamp (SIG), Athlete’s warehouse (SPWH), Thoreau (TTC), Weibo (WB)

friday: There are no notable reports scheduled for publication.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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