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US jobs report expected to show still tight labor market

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(Bloomberg) – The latest US jobs report is expected to highlight the resilience of the country’s labor market through 2022, despite the most aggressive pace of monetary tightening in decades.

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Payrolls are expected to have risen by around 200,000 in December, according to government data to be released on Friday. While this would mark a deceleration from the previous month, this pace of job growth still points to solid hiring and an overall robust labor market.

The continuing mismatch between labor demand and supply – which will likely be evident in the latest job openings data on Wednesday – continues to put upward pressure on wages.

Average hourly wages are expected to rise 5% in December from a year earlier in Friday’s jobs report, well above a pace that would be in line with the government’s 2% inflation target. the Federal Reserve. The unemployment rate should remain at a historically low level of 3.7%.

Meanwhile, the minutes of the Fed’s December meeting, released on Wednesday, could help explain the committee’s shift in sentiment toward higher inflation risk, even amid signs of a slowdown.

Other key U.S. data includes the latest update on business activity from manufacturers and service providers from the Institute for Supply Management, as well as weekly unemployment insurance claims figures.

What Bloomberg Economics says:

“The labor market is loosening but only gradually, and more slowly than expected by the Fed. The big picture is that the labor market is still far from a state consistent with non-accelerating inflation.

—Anna Wong, Eliza Winger and Niraj Shah. For a full analysis, click here

Elsewhere, eurozone inflation is likely to ease somewhat, and central banks in Israel and Sierra Leone may make the first interest rate hikes of 2023.

Click here for what happened last week. Below is our summary of what is happening in the global economy.

Asia

China’s purchasing managers’ indices will come under scrutiny to gauge the damage to the economy from a spike in coronavirus infections in December.

The government’s official PMI showed on Saturday that China’s abrupt reversal of its Covid Zero policy pushed economic activity – its services sector in particular – to the slowest pace since February 2020.

This data will be followed on Monday by a private industry PMI, which is expected to reveal a deeper contraction in manufacturing over the final weeks of the year.

Senior officials from the region, including Bank of Korea Governor Rhee Chang-yong and Singapore Prime Minister Lee Hsien Loong, will deliver New Year speeches that will be closely analyzed for opinions on the outlook. economic and any indication of policy change.

South Korea’s export figures will provide the latest assessment of world trade at the end of the year amid concerns about a further slowdown in the global economy.

Wage figures in Japan are expected to show a fall in wages still below inflation. At the end of the week, Taiwan will release its trade data, with export orders already plunging following a slump in global chip demand.

Europe, Middle East, Africa

The eurozone will start the year bigger than before, with Croatia becoming its 20th member on Sunday. Joining the single currency will open a new chapter for a country that emerged from the ashes of war just three decades ago.

Data throughout the week will underscore the challenges facing the Eurozone. Friday’s inflation is expected to have slowed to below 10% in December, ending the year with some respite while underscoring the magnitude of the European Central Bank’s task in reining in consumer prices.

National reports from previous days will likely paint a mixed picture. Inflation probably slowed in Germany and Italy, while it accelerated in France.

Other German data on unemployment, exports and factory orders will illustrate the health of Europe’s biggest economy as it suffers from what could be the worst recession currently affecting the region.

As every year, only a few public remarks from ECB officials are expected in the first week of 2023. Chief Economist Philip Lane will be among them, speaking to the American Economic Association on Friday.

Bank of England chief economist Huw Pill and policymaker Catherine Mann will speak at the same conference next weekend, the only engagements currently scheduled for UK central bank officials. UK mortgage approval data on Wednesday will be among the few key figures expected there.

Outside of Western Europe, the most important reports expected elsewhere will be inflation in Turkey on Tuesday. This is expected to slow to around 67% in December from 84% in November, reflecting strong base effects.

On Monday, Israel is expected to make one of the world’s first rate moves in 2023, extending its longest cycle of monetary tightening in decades. The Bank of Israel will likely rise to 3.75%, the highest since 2008, according to a Bloomberg survey.

On the same day, the Bank of Sierra Leone will also likely raise rates to stem a fall in what was one of the world’s worst performing currencies in the final quarter of 2022. Meanwhile, Poland’s Monetary Policy Council is expected to hold its benchmark rate at 6.75% on Wednesday.

Latin America

Brazil’s central bank’s market expectations survey kicks off the week, followed by Mexico’s remittances report in November and full-year trade data from Latin America’s largest economy, which should show that both exports and imports hit record highs in 2022.

At the start of a busy Thursday, analysts expect Brazilian industrial production data for November to have weakened after rising slightly in October.

Banxico’s Dec. 15 meeting minutes are expected to highlight policymakers’ indications that the current rate of 10.50% is not the terminal rate. Given that he has always been the most dovish member of the board, Mexican watchers are also eagerly awaiting news of who will be named to replace Deputy Governor Gerardo Esquivel.

Relentless demand in the region’s fastest growing economy is expected to have pushed Colombian inflation higher from November’s 12.53% year-on-year rate. Annual inflation has more than doubled in 2022 and is more than four times above the 3% target.

Closing out the week, data released on Friday could show that headline inflation in Chile has cooled slightly from November’s 13.3%. Banco Central de Chile President Rosanna Costa and her board said the key rate would remain at 11.25% until they were sure inflation returned to their 3% target .

–With help from Benjamin Harvey, Paul Jackson, Robert Jameson, Nasreen Seria, Karthikeyan Sundaram, Craig Torres, Monique Vanek and Michael Winfrey.

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