What You Should Know This Week

This week will focus on Wall Street job data as investors wait for the Labor Department’s September job report to be released on Friday. Several results from major consumer brands are also available.

Traders expect salary increases to accelerate in September after a shockingly disappointing job report in August when only 235,000 jobs were returned, up from the expected more than 700,000. Consensus economists estimate that 475,000 workers returned in September and the unemployment rate fell to 5.1%, the lowest level since March 2020.

“There is more hope for the job market. The next few months will be important and we could see higher labor force participation as fear of the virus subsides,” US economist Michelle Meyer wrote to Bank of America in a statement Friday.

Meyer also pointed to recent comments from Federal Reserve Governor Lael Brainard, who addressed some of the ongoing labor shortages and problems with the reintegration of individuals into the labor market.

“The decline in labor force participation appears to reflect COVID-related restrictions extended by Delta rather than permanent structural changes in the economy,” Brainard said in public statements in Arlington, Virginia last week.

HALLANDALE, FLORIDA – SEPTEMBER 21: A Now Hiring near the entrance to a Ross department store on September 21, 2021 in Hallandale, Florida. Government reports said initial jobless claims rose 20,000 to 332,000 in the week ended September 11 (Photo by Joe Raedle / Getty Images)

However, these virus-related risks remain a concern for the recovery in the labor market, and particularly for the September job report. And the U.S. economy has still lost over 5 million net wages and salaries since March 2020, underscoring the deficit that remains to recoup employment.

“On the flip side, we see the risk that public payrolls may decline slightly in September as education payrolls could decline slightly due to school closings amid the delta wave and negative amortization from the strong attitudes in the summer,” said Meyer. ‚ÄúTherefore, we believe that the growth in private payrolls will be slightly faster than the growth in non-agricultural payrolls. All in all, the data flow suggests another weak month of employment activity, but slightly faster employment growth compared to August. “

Importantly, the September job report will be a key factor in informing the Federal Reserve when to formally announce and begin throttling its pandemic-era asset purchase program. The central bank signaled last month that it believed the economy was on its way, without the exceptional monetary support it has seen over the year and a half.

In fact, Fed officials said the economy has already reached the central bank’s target inflation line and it only takes further progress in the labor market recovery to trigger the start of the slowdown.

“It wouldn’t take a knockout, great, super strong employment report,” said Federal Reserve Chairman Jerome Powell during his final press conference after the FOMC meeting in September. “It would take a reasonably good job report for me to feel that this test is passed.”

Consumer names for reporting receipts

A number of companies will be releasing quarterly results later this week, giving a first glimpse of how corporate earnings have held up in the third quarter, before a larger wave of companies roll out results in the coming weeks.

The names reporting this week will focus on major consumer brands like PepsiCo (PEP), Constellation Brands (STZ) and Levi Strauss (LEVI). One of the key themes of these reports and earnings calls will be comments on inflation, labor and supply chain challenges in the face of rising prices and material shortages already evident in various sectors of the economy.

For example, last week’s results from companies like Bed Bath & Beyond (BBBY) heralded the myriad supply-side problems retailers are facing. The company saw an unexpected drop in sales in the same store for its late August quarter, while Wall Street had forecast sales growth in the same store. The decline was due both to consumers’ reluctance to shop in person during the proliferation of the Delta variant and to supply pressure, which weighed on growth.

When asked if these challenges could subside as the year progresses, Bed Bath & Beyond CEO Mark Tritton said during the company’s results conference call that the company “does not expect any pressure on the supply chain to ease”.

“We have operated under unprecedented supply chain conditions that have exacerbated world trade since last year,” said Tritton.

Companies in other industries have raised similar concerns. Micron (MU), the largest domestic memory chip manufacturer, said in a letter to customers that it was still seeing price increases for materials and services and “didn’t expect those pressures to ease anytime soon,” according to a report from Bloomberg last week. And in early September, FedEx (FDX) saw a sharp drop in quarterly earnings as supply chain pressures and rising labor costs put pressure on the shipping giant’s margins.

Economic calendar

  • Monday: Factory Orders, August (1.0% expected, 0.4% in July); Orders for household goods, August finale (1.8% in the form); Durable goods orders, excluding transportation, August finals (0.2% in the previous print); Orders for capital goods excluding defense equipment, excluding aircraft, August final (0.5% in the previous print); Non-defense capital goods orders, excluding aircraft, August finals (0.7% in previous print)

  • Tuesday: Trade balance, August (-70.5 billion USD expected, 70.1 billion USD in July); Markit US Services PMI, September Final (54.4 expected, 54.4 in prior press); Markit US Composite PMI, September finals (54.5 in previous press); ISM Services Index, September (60.0 expected, 61.7 in August)

  • Wednesday: MBA Mortgage Applications, Week Ending October 1 (-1.1% the previous week); ADP Employment Change, September (450,000 expected, 374,000 in August)

  • Thursday: Challenger downsizing year over year, September (-86.4% in August); Initial jobless claims, week ending October 2 (349,000 expected, 362,000 the previous week); Ongoing Claims, week ended September 25 (2.802 million the previous week); Consumer Credit, August ($ 18,000 billion expected, $ 17,004 billion in July)

  • Friday: Non-Farm Payroll Changes, September (488,000 expected, 235,000 in August); Unemployment Rate, September (5.1% expected, 5.2% in August); Monthly Average Hourly Wage, September (0.4% expected, 0.6% in August); YoY Average Hourly Wage, September (4.6% expected, 4.3% August); Employment Rate, September (61.7% in August); Wholesale inventory, monthly comparison, August final (1.2% expected, 1.2% based on previous estimate)

Earnings calendar

  • Monday: No noteworthy reports planned for publication

  • Tuesday: PepsiCo (PEP) before market opening

  • Wednesday: Constellation Brands (STZ) before market opening; Levi Strauss (LEVI) after the market closes

  • Thursday: Conagra Brands (CAG), Tilray (TLRY) before market opening

  • Friday: No noteworthy reports planned for publication

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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