Central Bank Meetings and Jobs Report Headline the Week

Jul 30, 2018
Chinese Embassy

July Employment Headlines Busy Economic Calendar

The first week of the month is always full of economic releases headlined by the jobs report but this time we have the added attraction of three central bank meetings. The FOMC concludes its meeting on Wednesday but the expectation is for them to merely dispel the last bit of uncertainty over a September rate hike. The Bank of Japan kicks off the central bank gatherings with its rate setting meeting tomorrow with rumors they may announce moving the rate peg on 10-year bond yields higher from its current 0.1%. The Bank of England completes the central bank triple play with a Thursday meeting with no major policy change expected. Meanwhile, the economic releases are expected to portray an economy still humming along quite nicely despite trade war rhetoric and tough tariff talk.


Treasuries

Treasuries

Short-Term Rates

Short-term Rates

Economic Calendar

Economic Calendar

 


Top Events of the Week Top 5 Events for the Week

JULY 30 – AUG 3,  2018

1. July Employment Report — Friday
2. Central Bank Meetings — Tues./Wed./Thurs.
3. July ISM Manufacturing & Services — Wed./Fri.  
4. June Personal Income & Spending — Tuesday
5. June Trade Balance — Friday

 

 

1.  July Employment Report —Friday

The July jobs release is expected to be another solid report with monthly job growth of 193,000 versus 213,000 in June with the unemployment rate remaining at 3.9% for a second straight month. The monthly average gain in jobs over the last year has been 198,000 so the July print is expected to be just under that average.  Once again, average hourly earnings will be the key metric and it’s expected to increase 0.3% MoM beating the June increase of 0.2%.  Year-over-year average hourly earnings are expected to remain at 2.7% for the third straight month.   The average over the past year has been 2.6%YoY, so an above-average print is expected but one that fails to signal the hoped for acceleration in wage growth that workers and the Fed are looking for.

 

Average Hourly Earnings YoY

 

2.  Central Bank Meetings —All Week

The FOMC begins two days of meetings tomorrow but the real suspense, or drama, probably lies with other central banks that are also meeting this week. The FOMC is expected to conclude its two-day meeting on Wednesday with no change in policy but they may tweak the statement to reflect a high degree of certainty that they will hike in September. Meanwhile, the Bank of Japan holds its policy meeting tomorrow amidst rumors they are about to raise the peg on the 10-year Japanese Bond yield from its current 0.1%. That rumor caused a bit of Treasury selling that’s continuing today but BoJ officials were quick to deny any policy change would be forthcoming at this week’s meeting. In any event, markets here will be attuned for the actual monetary decisions. The Bank of England meets Thursday and is not expected to adjust policy but the suspense will be in whether they position for a hike at their September meeting.

 

3.  ISM Manufacturing & Services Survey for July —Wed./Fri.

The July ISM Manufacturing Survey is due on Wednesday followed by the non-manufacturing, or services, survey on Friday. These two July readings combined with  the jobs report will provide an expansive look into economic results for the month. The manufacturing survey is expected to print 59.3 versus 60.2 in June.  Anything above 50 represents an expanding sector so the survey is expected to show continued strength in the manufacturing sector.  The average over the past year has been 59.0 so the July result should show a slight increase versus the yearly average.  The non-manufacturing (services) survey is due Friday and the forecast is for it to move slightly lower to 58.6 versus 59.1 in June. The average over the past year has been 57.9 so a solid beat on the twelve-month average is expected and well above 50 indicating an expanding sector representing nearly 90% of the economy.

 

4.  Personal Income & Spending—Thursday

While last week’s GDP release contained the personal income and spending details, the June report due on Thursday will give us a look at the momentum of both metrics heading into the third quarter. Personal income is expected to rise 0.4% matching the May increase.  Personal spending is also expected to rise 0.4%, and beating the May print of 0.2%. Given consumption for the quarter increased 4.0%, it’s likely the June spending figure matches or beats the estimate. Real spending—adjusted for inflation— is expected to increase 0.3% versus an unchanged reading in May.   The Core PCE (YoY) inflation measure is expected to remain at 2.0% for the second month.

 

5.  June Goods Trade Balance—Friday

With trade war rhetoric all the rage right now the monthly look at trade deficits has become equal parts political and economic.  The goods trade deficit was -$43.5 billion in June 2017 and is expected to be –$46.0 billion in June 2018. The deficit began the quarter at  -$47.2 billion, so the expected narrowing to -$46.0 billion indicates the trade sector will be additive to second quarter GDP and given the strong GDP results from last Friday it’s likely the deficit did narrow as expected or did better. 

 

 

 


Technicals Investment Yield Ranges Over Last Year

 

US Treasuries

FHLB Agency Bullets

Mortgage Backed SecuritiesMunicipals

US Corporate - Financials

US Agency Swap Rates

 Source: Bloomberg

 

 

 


 

Tom Fitzgerald Signature

Thomas R. Fitzgerald

Director, Strategy & Research

Tfitzgerald@centerstatebank.com

 

 

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