8 Economic Indicators To Watch This Week For Clues On Fed's Next Move

If investors hoped that the recent Jackson Hole symposium would clarify the Fed’s direction on interest rates, it appears to have only added more ambiguity to the market.

Fed Chair Jerome Powell‘s speech carried both hawkish and dovish undertones. He asserted the Fed’s preparedness to “raise rates further if appropriate,” while also pledging to “proceed carefully” in the decision of whether to tighten policies or maintain the current stance.

Money markets currently price in an 80% probability of the Fed opting to keep rates steady in September. However, the outlook for November’s FOMC meeting suggests a 61% chance of a rate hike.

The yield on the rate-sensitive 2-year Treasury note, which is tracked by the U.S. Treasury Note ETF UTWO, surged above 5%, hitting highs last seen in March.

Given the Fed’s reiterated commitment to data-driven decision-making, these upcoming indicators could serve as key pieces of the puzzle, providing further clarity on the Fed’s potential moves and subsequently shaping market expectations regarding interest rates, which in turn have a major impact on overall risk sentiment.

Read also: US Stocks Grind Higher As China Cuts Taxes On Trading, Eyes Further Stimulus: What’s Driving Markets Monday?

Jobs Report: NFPs, Unemployment Rate and Wage Growth

The upcoming August jobs report, along with September’s CPI release, carries significant weight in shaping Fed decisions. Watch out for key indicators like non-farm payrolls, unemployment rates, and wage growth. Also, keep an eye on JOLTS data on Tuesday, the ADP employment report on Wednesday, and weekly jobless claims on Thursday.

Strong job growth and rising wages would likely push the market to anticipate Fed rate hikes, increasing probabilities for upcoming meetings. Conversely, if job and wage growth slow, the Fed might keep rates unchanged, pending inflation data

Tuesday Aug. 29, 2023

• JOLTs Job Openings (July): 9.582 mln (previous); 9.465 mln (expected)

Wednesday Aug. 30, 2023

• ADP Employment Change (August): 324,000 (previous); 194,000 (expected)

Thursday Aug. 31, 2023

• Initial jobless claims for the week ending Aug/26: 230,000 (previous); 235,000 (expected)

Friday Sept. 1, 2023

• Non Farm Payrolls (August): 187,000 (previous); 170,000 (expected)
• Unemployment rate (August): 3.5% (previous); 3.5% (expected)
• Average Hourly Earnings (August): 0.4% month-on-month (previous); 0.3% (expected)

Inflation: Investors Await Fed’s Favorite Inflation Gauge For July

Scheduled for Thursday, the July readings of the core Price Consumption Expenditure (PCE) index, the Fed’s favored inflation gauge, are set to be released. A higher-than-expected figure could unleash hawkish reactions by market participants, fueling bets on a further Fed’s rate hike. On the other hand, an inline or lower reading could tame rate-hike bets, at least for the September’s meeting.

• Core PCE Price Index (July): 4.1% year-on-year (previous); 4.2% (expected)
• PCE price index (July): 3% year-on-year (previous); 3.3% (expected)

Economic Activity: Q2 GDP 2nd Estimate

The Bureau of Economic Analysis is set to unveil the second estimate of second-quarter GDP data on Thursday.

The initial estimate revealed a robust growth of 2.4% on a quarter-on-quarter annualized basis in Q2, outpacing the 2% growth rate in Q1 and significantly exceeding market projections of 1.8%.

Should the revision surpass expectations, it could reinforce the Fed’s confidence in the robustness of the U.S. economy, bolstering its stance on the ability to endure increased interest rates. This would likely maintain the central bank’s unwavering attention on tackling inflation.

• GDP Growth Rate QoQ 2nd Est: 2.4% (initial est.)

Other Data To Monitor

There are additional crucial economic indicators due out this week lurking on the sidelines, capable of influencing both the markets and the Federal Reserve’s projections for interest rates.

Tuesday Aug. 29, 2023

• Conference Board (CB) Consumer Confidence: 117 (previous), 116 (expected)

Wednesday Aug. 30, 2023

• MBA 30-Year Mortgage Rate: 7.31% (previous)
• Pending Home Sales (July): 0.3% month-on-month (previous); -0.6% (expected)

Thursday Aug. 31, 2023

• Personal spending (July): 0.5% month-on-month (previous); 0.7% (expected)
• Personal income (July): 0.3% month-on-month (previous); 0.3% (expected).

Friday Sept. 1, 2023

• ISM Manufacturing PMI (August): 46.4 (previous); 47 (expected).

Read now: After Fed’s Jerome Powell, G7 Central Bank Chief Fires A ‘Higher For Longer’ Rate Warning: ‘Inflation Fight Isn’t Won Yet’

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