Market participants this week are gearing up for a heavy week of new US economic data, including Friday’s monthly report from the Labor Department on non-farm payrolls.
And with fewer than 40 days to go until the presidential election, new developments on the campaign front will take center stage. President Donald Trump is set to face former Vice President Joe Biden at Case Western Reserve University in Cleveland, Ohio, on Tuesday for a 90-minute session that will mark the first of three debates ahead of the Nov. 3 presidential election.
Topics set to be discussed include the records of Trump and Biden, the Supreme Court, Covid-19, the economy, race and civil unrest, and election integrity, according to the nonpartisan Commission on Presidential Debates. Fox anchor Chris Wallace is set to moderate the session, which will be at 9:00 p.m. ET.
The debate and last leg of campaigning come against a growing list of worries for Americans and investors, as the Covid-19 pandemic continues to grip the economy and as Congress now appears to be bracing for a Supreme Court confirmation battle, potentially at the expense of quickly passing further fiscal stimulus to aid the virus-stricken economy. Economic reports later this week are set to reveal more on the state of the US labor market and consumer against a backdrop of these concerns.
September jobs report
To this end, the Labor Department’s September jobs report will be closely monitored. The report is expected to show the first month that net payroll gains were fewer than 1 million jobs since February, as the pace of the economic recovery continues to sputter. Consensus economists expect to see that non-farm payrolls increased by 850,000 in September, according to Bloomberg data.
In two months, US employment plunged by more than 22 million, with widespread lockdowns and business closures sweeping the country between March and April. The reopening of businesses starting in May helped bring back more than 10.6 million of those jobs through August.
However, even with September’s expected increase and a fifth straight monthly gain in net payrolls, the US economy would still be only about halfway to recuperating the jobs lost during the pandemic. And the rate of payroll gains has slowed in each month since surging by a record 4.781 million in June.
“Evidence from high-frequency data, such as payrolls tracking figures from Homebase suggests a plateauing in private sector employment while purchasing managers’ indices suggest only modest gains,” ING economists wrote in a note Friday. “Set against this we know that last month’s employment gain of 1.37 [million] included 240k government Census workers who were chasing people up to fill in their forms. There is going to be a partial unwind in the September report which will subtract from the headline figure.”
“There could be some additional downside risk from the confusion over in-person and remote schooling,” they added. “With many parents having to stay at home as remote schooling continues in many parts of the country this could further constrain jobs growth.”
The unemployment rate is also expected to improve but at a moderating pace, ticking down to 8.2% from the 8.4% reported in August, which itself had been the first reading below 10% since March.
Even as the US economy brings back workers, an increasing number of Americans have found their layoffs to be permanent. Fewer than half of unemployed workers reported being on temporary layoff or furlough in August, representing a major slide from the near-80% in the category in April. The number of permanent job losers in August rose by 534,000 to 3.4 million, with this measure having increased by 2.1 million since February.
Two other labor market reports will precede the Department of Labor’s jobs report this week. The first will be ADP’s National Employment report on private payrolls, which so far during the pandemic has consistently undershot the number of private jobs reported by the Labor Department.
In August, ADP reported private employers brought back 428,000 payrolls, for a figure less than half the 875,000 subsequently reported by the Labor Department. Consensus economists are looking for ADP to report 650,000 private payroll gains for September.
Then second will be the Labor Department’s latest weekly jobless claims report on Thursday, offering a more up-to-date picture of the state of the labor market in the US. The monthly jobs report survey week takes place around the 12th of each month, making it a more backwards-looking indicator.
Consensus economists expect to see jobless claims come in at 850,000 for the week ended September 26, for just a modest improvement from the prior week’s 870,000. That figure had itself been an unexpected increase over the week before.
Personal spending and income, consumer confidence
Other data this week will also be in focus to give a more comprehensive picture of the state of the consumer and consumer spending in the economy.
The Bureau of Economic Analysis (BEA) will release its report on personal income and spending for August on Thursday. Personal income is expected to fall by 2.4% month over month, in the first report following the phase-out of federal enhanced unemployment benefits of $600 per week at the end of July. It is as yet unclear how the BEA will consider the extended enhanced unemployment benefits of $300 per week offered through Trump’s memorandum in August, with that program having been slow to get off the ground.
Personal spending, on the other hand, is expected to have risen 0.7% in August following July’s 1.9% gain. August’s retail sales report presaged a slowdown in consumer spending, with purchases having risen just 0.6% against expectations for a 1.0% increase.
“Spending on goods slowed as indicated by the August retail sales report, while spending on services likely recovered modestly with continued loosening of Covid-19 restrictions around the US,” Nomura economist Lewis Alexander said in a note Friday. “In particular, further improvement in spending at restaurants likely supported service spending recovery in August.”
Still, that extended recovery in spending could prove unsustainable in absence of a commiserate rise in income.
In terms of consumer sentiment, the Conference Board’s September consumer confidence index is expected to show just a modest rise over August. Consensus economists expect the index to tick up to 89.8 for September after August’s pandemic-era low reading of 84.8. The index was at 132.6 in February, before the coronavirus outbreak spread widely in the US.
“While further reopening in September may have supported the Conference Board’s measure, slowing labor market recovery likely weighed on this index to some degree,” Alexander said.
Monday: Dallas Fed Manufacturing Activity Index, September (9.5 expected, 8.0 in August)
Tuesday: Advance Goods Trade Balance, August (-$81.8 billion expected, -$79.3 billion in July); Wholesale Inventories, August month-on-month preliminary (-0.1% expected, -0.3% in July); Retail Inventories, August month-on-month (1.2% in July); S&P CoreLogic Case-Shiller 20-City Composite Home Price Index, July month-on-month (0.1% expected, 0.00% in June); S&P CoreLogic Case-Shiller 20-City Composite Home Price Index, July year-on-year (3.6% expected, 3.46% in June); Conference Board Consumer Confidence, September (89.8 expected, 84.8 in August)
Wednesday: MBA Mortgage Applications, week ended September 25 (6.8% during prior week); ADP Employment Change, September (650,000 expected, 428,000 in August); GDP Annualized Quarter-on-Quarter, second quarter third revision (-31.7% expected, -31.7% in prior print); Personal Consumption, second quarter third revision (-34.1% expected, -34.1% in prior print); Core Personal Consumption Expenditures Quarter-on-Quarter, second quarter third revision (-1.0% expected, -1.0% in prior print); MNI Chicago PMI, September (52.0 expected, 51.2 in August); Pending Home Sales, August month-on-month (2.5% expected, 5.9% in July)
Thursday: Challenger Job Cuts, September year-on-year (116.5% in August); Initial Jobless Claims, week ended September 26 (850,000 expected, 870,000 during prior week); Continuing Claims, week ended September 19 (12.58 million during prior week); Personal Income, August (-2.4% expected, 0.4% in July); Personal Spending, August (0.7% expected, 1.6% in July); Core Personal Consumption Expenditures Deflator, August month-on-month (0.3% expected, 0.3% in July); Core Personal Consumption Expenditures Deflator, August year-on-year (1.2% expected, 1.0% in July); Markit US Manufacturing PMI, September final (53.5 expected, 53.5 in prior print); Construction Spending, August month-on-month (0.8% expected, 0.1% in July); ISM Manufacturing, September (56.0 expected; 56.0 in August)
Friday: Change in Non-Farm Payrolls, September (850,000 expected, 1.371 million in August); Unemployment Rate, September (8.2% expected, 8.4% in July); Average Hourly Earnings, September month-on-month (0.2% expected, 0.4% in August); Average Hourly Earnings, September year-on-year (4.8% expected, 4.7% in August); Labor Force Participation Rate, September (61.7% in August); University of Michigan Consumer Sentiment, September Final (79.0 expected, 78.9 in August); Factory Orders, August (1.4% expected, 6.4% in July); Durable Goods Orders, August final (0.4% in prior print), Durable Goods Orders Excluding Transportation, August final (0.4% in prior print); Non-defense Capital Goods Orders Excluding Aircraft, August final (1.8% in prior print); Non-defense Capital Goods Shipments Excluding Aircraft, August final (1.5% in prior print)
Monday: Thor Industries (THO) before market open
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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