U.S. equity markets are expected to open a little lower in lighter trade on Friday as traders adopt some caution ahead of today’s U.S. jobs report.
This more restrained approach from investors is something we quite often see on jobs day as not only do we get a raft of potentially high impact data, but with every Fed meeting now being “live”, it has the potential to impact the outcome of the next meeting. It will be interesting to see how markets respond to the jobs report today given that Janet Yellen appeared to all but reject the possibility of a hike in April, or even the next few months, earlier this week.
That said, there is clearly a lot of disagreement among Fed policy makers at the moment, as has been evident by the varying comments over the last couple of weeks. With this lack of consensus, a move in April looks extremely unlikely, especially with Yellen in the dovish camp, but another strong jobs report today could make the June meeting much more interesting. It could go some way to alleviating some concerns among the moderate dovish officials.
The question is, what do policy makers want to see from today’s report? While another jobs non-farm payrolls number and drop in unemployment will be welcome, especially if accompanied by rising participation, I think wage growth is what they’re craving. The decline in oil prices enabled consumers to deleverage and didn’t offer much of a boost to spending, potentially because it was seen as a short term benefit. A more sustainable increase in wages could encourage consumers to spend more, which would give the economy the boost it needs and could help get inflation back to target, with it only falling slightly below now at 1.7%, according to the Fed’s preferred measure, the core PCE price index.
For a look at all of today’s economic events, check out our economic calendar.