Wednesday’s release of the downbeat US Automatic Data Processing Employment Change and Job Openings data indicated that labor demand is exceeding the supply in the United States. As per the ADP Employment data, the US economy added 105K jobs in January while job openings showed resilience portraying an absence of an adequate labor force. Also, the US Department of Labor showed a surprise decline in the number of individuals applying for jobless claims for the first time last week to 183K vs.
According to the estimates, the US NFP data is seen at 185K lower than the former release of 223K. Apart from that, the Unemployment Rate is expected to escalate to 3.6% vs. 3.5% the prior release. Apart from the official US employment data, investors will also focus on the US ISM Services PMI data. The Services PMI is expected to escalate to 50.3 from the former release of 49.6 while the New Orders Index could jump to 57.6 against 45.2 released earlier.
From declining consumer spending and Producer Price Index to the slowdown in economic activities, each inflation indicator is calling for a continuation of inflation softening ahead. However, the labor cost index is still a concern for Fed chairas higher purchasing power with households could trigger revenge buying and therefore a jump in retail demand.
On Friday, the Average Hourly Earnings data is seen at 4.9% vs. the prior release of 4.6% on an annual basis. While monthly data is seen steady at 0.3%. Led by exceeding labor demand against the supply, higher negotiation power in favor of job seekers could dent the price index declining trend, which can shrug off the rumors calling for a pause in the policy tightening pace by the Federal Reserve.An interest rate hike of 50 basis points by the European Central Bank was widely expected.