The big news last week was employment, which posted much stronger than expected. This is good news, ultimately, but markets tend to focus on how it affects the Fed’s plans for interest rates. As it stands, markets expect the Fed to keep rates where they are for a while longer.
In that vein, this week we get data on inflation. This could easily move markets around if it is much different than the 2.9% that is expected. Jobs and inflation are the two main concerns of the Fed, so seeing either of those post away from expectations is likely to move prices around quite a bit.
Let’s Connect
As I mentioned last week (and the week before), I am now on recession watch. All of the traditional recession indicators are blinking red, and I see it likely that one starts within the next few quarters. That said, it is possible that the economy pulls higher before that happens — last week’s employment figures were a strong indicator that this could happen — and I am watching earnings very closely.
Earnings will be the final arbiter of whether the economy managed to miss a recession. At the moment, analysts expect earnings growth of 11% to 14%, which is much more in line with economic expansion. JPMorgan, Wells Fargo, Citi, and other major financials will be the focus this week. Also important in these earnings reports: the rate of loan defaults.
Chart of the Week
This week’s chart shows us the number of jobs created by industry. What we have seen over the course of 2024 is a contraction in manufacturing (green in the chart), but otherwise general growth in other industries (notice, how much Education and Health Services have grown over the past year — blue in the chart below).
It will be important to watch these figures to see if industries begin to slow down hiring (and which). For the moment, though, overall hiring remains strong and diversified.
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