On Tuesday will come the jobs report for November, and economists expect it to show employers added 40,000 more jobs than they cut during the month. Thursday will bring an update on the inflation that US consumers are feeling, and economists expect it to show inflation was at 3.1 per cent last month, still higher than households and policymakers would like.
Such data is under the microscope because the Federal Reserve is trying to figure out if a slowing job market or high inflation is the bigger problem for the economy. The Fed is in a potentially tough spot because fixing one of those problems by moving interest rates would likely worsen the other in the short term.
The hope on Wall Street is that the job market weakens, but only by a little: enough to get the Fed to lower interest rates but not so much that a recession swamps the economy. Wall Street loves lower rates because they can give the economy and prices for investments a boost, even if they also may worsen inflation.
“With the Fed still appearing to be more focused on labor-market weakness than inflation, we’re likely facing a ‘bad news is good’ scenario for the jobs report,” according to Chris Larkin, managing director, trading and investing, at E-Trade from Morgan Stanley.
“As long as the numbers don’t suggest employment is falling off a cliff,” that would mean the market would likely welcome soft numbers, he said.
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The spotlight will be brightest on the unemployment rate, not the overall job growth numbers, because the latter is feeling downward pressure from a drop-off in immigrant workers. Economists expect Tuesday’s report to show the unemployment rate at 4.4 per cent, which would keep it near its highest and worst level since 2021.
Treasury yields eased in the bond market ahead of the updates. A report earlier on Monday morning also said that a measure of manufacturing strength in New York state unexpectedly weakened, when economists expected to see continued growth.
The yield on the 10-year Treasury fell to 4.17 per cent from 4.19 per cent late Friday.
Elsewhere on Wall Street, shares of iRobot tumbled 73 per cent after the maker of Roomba vacuums said holders of its stock will likely face a total loss after it filed for Chapter 11 bankruptcy protection over the weekend. The company has reached an agreement with its primary contract manufacturer, Picea, to buy it through a process supervised by a US bankruptcy court.
In stock markets abroad, indexes rose in Europe following weaker finishes in Asia.
Indexes fell 1.3 per cent in Hong Kong and 0.6 per cent in Shanghai after the Chinese government reported a drop in investment in factory equipment, infrastructure and other fixed assets. It’s the latest signal that demand in the world’s second-largest economy remains weak.
Japan’s Nikkei 225 sank 1.3 per cent after a quarterly survey of big manufacturers by the central bank showed a slight improvement in sentiment. That could encourage the Bank of Japan to go ahead with a hike to interest rates.
AP
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