Will US jobs numbers pick up as the economic recovery gathers pace?

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After the last two US monthly jobs came in well below economists’ forecasts, the pace of hiring in June is expected to have accelerated following rising vaccinations and reopenings across the country.

Economists polled by Bloomberg forecast Friday’s non-farm payrolls report will show that the US economy added 700,000 jobs this month, driven by the leisure and hospitality industries — substantially higher than the 559,000 jobs created in May and far above April’s 278,000 figure. The unemployment rate, meanwhile, is projected to have dipped slightly to 5.7 per cent from 5.8 per cent. 

Labour shortages, caused by worries about catching Covid in the workplace, childcare limitations and — according to some economists and politicians — extended federal unemployment benefits, have become more acute, with employers competing to hire as demand picks up from pandemic lows. But low Covid transmission, rising vaccination rates and the reopening of major economic centres such as New York and California have set the stage for a rebound in hiring. 

“We’re definitely on the path towards healing, [but] there will be certain roadblocks that will hamper our progress towards full recovery” said Oren Klachkin, lead economist at Oxford Economics, who has predicted that non-farm payrolls would return to pre-pandemic levels in the first quarter of 2022. 

At a time when markets are fretting about inflation, Friday’s report is also expected to show higher wage pressures, with average hourly earnings expected to rise 3.6 per cent from a year ago. 

Federal Reserve officials this month pencilled in sharply higher inflation this year and brought forward their projections for the first post-pandemic interest rate rise by a year to 2023, unnerving markets. Since then, Fed chair Jay Powell and his inner circle have sought to reassure markets about their caution in withdrawing support. Mamta Badkar

How strongly has Japan’s economy rebounded?

The latest quarterly Tankan survey, a closely watched proxy for Japan’s economic performance, is expected to show a sharp divide between manufacturing and services when it is published on Thursday.

A slow vaccination rollout and soaring coronavirus cases had kept parts of the economy in stasis, with nine urban prefectures under states of emergency restrictions until recently. However while the services sector continues to struggle, manufacturing is forecast to show clear signs of recovery.

“The key factor to watch out for [this] week will be how much manufacturing is going to gain,” said Stefan Angrick, senior economist at Moody’s Analytics in Tokyo. “We would expect manufacturing to rise because of the pick-up in global activity.”

Compiled by the Bank of Japan, almost 10,000 companies take part in the Tankan survey, and it has a more than 99 per cent response rate.

The survey’s index for large manufacturers, which stood at minus 10 in the final quarter of 2020, is expected to rise from a reading of plus 5 in the first quarter of this year to 16 in the second, according forecasts compiled by Bloomberg. The economic resurgence in the US and China, Japan’s main export markets, is anticipated to be the main driver.

By contrast, the survey’s non-manufacturers’ index, which takes in service companies, is expected to inch up from minus 1 in the first quarter to plus 3 in the second, an indication of how hard the retail and travel sectors have been hit by Covid-19 restrictions. Robin Harding

How strong are price pressures in Europe?

The pace of price increases in the eurozone is expected to show a slight dip in new data out Wednesday, but economists think inflation will continue its upward march through the rest of the year.

Eurostat’s flash eurozone inflation data for June will probably show a slight lull, even as the bloc emerges from lockdowns and its vaccination programme continues apace. A survey of business analysts by Bloomberg predicts inflation will come in at a year on year pace of 1.9 per cent.

But for the remainder of this year, most economists expect price growth to be on an upward trajectory, a view bolstered by an IHS survey that showed the proportion of businesses reporting price increases in June compared with the previous month rose to its highest level since records began two decades ago.

Line chart of purchasing managers' price sub-index showing output prices for goods and services in the eurozone rose at the fastest pace on record

Eurozone inflation exceeded the European Central Bank’s target for the first time in more than two years in May, jumping to 2 per cent, and the business survey by IHS Markit released last week suggested price pressures have also picked up this month.

Reinhard Cluse, economist at the bank UBS, said inflation would peak at 2.6 per cent in November after a slight dip in the early summer, but he noted that the IHS survey signalled “that this year’s inflation peak might be higher than our forecast assumes”.

The uptick in prices has been caused by shortages and supply chain bottlenecks, increased fuel and transport costs and upward pressures on wages.

Like their US peers, ECB policymakers say the inflation situation will be transient as the effects of pandemic restrictions work their way through economies. The bank forecasts headline inflation will drop to 1.4 per cent in 2023, as energy price rises wane.

Both the US and eurozone central banks “seem willing to not only tolerate temporarily higher headline inflation but also the beginnings of a wage-price spiral”, noted Carsten Brzeski, economist at the bank ING. Valentina Romei

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