By Noreen Burke
Investing.com - Investors will be looking ahead to Friday's U.S. employment report for August for a snapshot of how the labor market recovery from the pandemic is faring. Markets will also be keeping an eye on appearances by top Federal Reserve officials after Chair Jerome Powell last week announced a sweeping policy rewrite that puts more emphasis on bolstering the labor market than controlling inflation. The S&P 500 is on track to post its strongest August in 34 years, while the Dow will have new names in the index from Monday. Economic reports from the euro zone will shed more light on the durability of the bloc’s recovery, while PMI data from China will watched for signs of how the recovery in the world’s second-largest economy is progressing. Here’s what you need to know to start your week.
- August nonfarm payrolls figures
Friday's nonfarm payrolls will be anxiously awaited amid fears that the recovery in the labor market is stalling, with initial jobless claims hovering at around 1 million per week.
The consensus forecast is for the U.S. economy to have added 1.4 million jobs in August, down slightly from 1.76 million in July, while the unemployment rate is expected to tick down to 9.8% from 10.2%.
But some analysts are speculating that the jobs report could be weaker than expected after recent poor consumer confidence data pointed to anxiety over rising Covid cases and worries about job prospects.
Thursday’s report on jobless claims will give a more up-to-date snapshot of the labor market after recent reports indicated that the next stage of the labor market recovery will be much slower going.
- Fed speakers
Investors will get the chance to hear from three senior Fed officials as they digest last week’s announcement of the central bank’s new strategy that would keep interest rates near zero even if inflation rises above its target in order to bolster the recovery in the economy and the labor market.
Vice Chair Richard Clarida is to give a speech on the Fed’s new monetary policy framework on Monday. Governor Lael Brainard is also set to deliver remarks on the new policy framework a day later, while New York Fed President John Williams is due to discuss the economy and the pandemic on Wednesday.
The Fed will enter its blackout period before its next policy meeting, due to be held on Sept. 15-16, at midnight on Friday.
- Stock market disconnect
On Friday the S&P 500 surged to its sixth record closing high since confirming a bull market on Aug. 18 powered by Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) in a rally that has highlighted the divide between the soaring stock market and a struggling U.S. economy.
With fiscal stimulus ebbing, signs are growing that the economy's recovery is slowing. Economists still expect a sharp rebound in growth this quarter, but are trimming estimates for the fourth quarter.
The S&P 500 is on track to post its strongest August in 34 years and stocks are set to go into September on a strong footing after the Fed’s commitment to keep interest rates near zero even if inflation runs hot.
Meanwhile, some new names will be appearing on the Dow from Monday after the index was adjusted with Salesforce (NYSE:CRM), Honeywell (NYSE:HON) and Amgen (NASDAQ:AMGN) replacing Pfizer (NYSE:PFE), ExxonMobil (NYSE:XOM) and Raytheon (NYSE:RTN).
- Euro zone recovery
Inflation figures out of the euro zone on Tuesday are expected to show price growth remained tepid in August, while unemployment figures the same day are expected to point to a slight uptick.
Data on German factory orders on Friday is expected to show that the pace of the recovery slowed in July.
Investors will also get to hear from several European Central Bank policymakers, with Vice President Luis de Guindos, Chief Economist Philip Lane and Governing Council members Jens Weidmann and Klaas Knot all making appearances during the week.
- China PMIs
China’s August PMI reports on Monday and Tuesday should provide a health check on the world's second-largest economy.
The official manufacturing PMI on Monday is seen picking up to 51.2 in August from July's four-month high of 51.1 and Tuesday's Caixin manufacturing PMI is expected to ease to 52.7 from 52.8 in July.
Activity in the country’s vast industrial sector is steadily returning to levels seen before the pandemic paralyzed large tracts of the economy in the early part of the year.
Pent-up demand, stimulus-driven infrastructure and strong exports have been the main factors driving the rebound, but private consumption is lagging as consumers remain cautious about spending.
--Reuters contributed to this report