Week in a Glance: Failed NFP, Inflation in the Eurozone & ECB

The main event of the past week was the publication of statistics on the US labor market. In theory, it could change market expectations from the results of the FOMC meeting on September 22. In practice, he showed that in his last speech at a symposium in Jackson Hole, Powell was more right than wrong when he said that it is too early to tighten monetary policy in the United States because the economic recovery is extremely unstable.

The NFP numbers turned out to be a real cold shower. 235K with a forecast of about 750K is, of course, a failure. That is, from the standpoint of pre-pandemic times, the figure is simply excellent, but now we are in reality, when millions of jobs were lost (at the moment we are talking about about 5.6 million), respectively, much larger numbers are needed to return to the old reality. The reason for this failure is the experts' underestimation of the new outbreak of the pandemic in the United States. Everything can be explained by one figure: in the hospitality and leisure sector in August, the number of jobs showed zero growth. And this is after + 415K a month earlier, created by this sector and after 2.1 million, created in the period from February to July.

If you wish, of course, you can find a few spoons of honey in this ointment. For example, unemployment fell from 5.4% to 5.2%. Average hourly wages have risen sharply (up to 4.3% against the forecast of 4%), which means hello inflation. Yes, and the past NFP values ​​were revised upward (for both June and June), as a result of which the corrections added 134,000 to the original estimates.

As for the reaction of financial markets to statistics on the US labor market, in the case of the dollar, it was natural - the dollar was sold. The stock market tried to grow (which is also logical in the context of US monetary policy), but it turned out so-so. In general, the continuation of these trends can be expected this week as well.

Speaking about the coming week, it is worth noting that the ECB meeting may become its key event. The fact is that last week inflation data from the eurozone was frankly shocking: consumer and industrial inflation showed sharp growth rates, reaching the highest levels in the last 10+ years. Which naturally provoked questions, is it not time for the ECB to do something about all this. Thursday can provide an answer to this question.