Global Economics – October 1, 2021
Introduction
What an informative week that was and what an eventful week that lies ahead. Eventful because the Federal Reserve has cornered itself into something it always said would never happen: a policy shift dependent entirely on the outcome of one single indicator. Econoday’s consensus for September nonfarm payrolls of 475,000 would definitely fit Jerome Powell’s criteria for a “decent” report that in turn would trigger a November start to tapering; even perhaps the 300,000 low-end estimate of Econoday’s consensus range would be enough to qualify as “decent”, at least compared to August’s washout gain of 235,000.
The Global Economy
Employment
September is a hard month on its own to forecast, never mind a pandemic. The timing of school years, when the Labor Day holiday falls on the calendar, whether it’s a 4- or 5-week reference period, and not least hurricanes that all affect the history of September payrolls. This year is more difficult than ever given the shortage of skilled labor and the displacement of millions of workers. Looking back at data through September 2001, the as-reported result (that is the unrevised, actual print at the time of release) undershot Econoday’s median estimate in 15 of the 20 years. Does this point to the risk of another disappointment? Perhaps. A main risk to September’s outlook may well come from the sector that’s been playing havoc with all the data: autos where production, starved of parts, has been grinding lower. As for Fed policy, the balance in play is between: 1) employment where the need for prompt recovery points to the need for substantial stimulus; and 2) inflation where price pressures (still far beyond the Fed’s long-term 2.0 percent target) point to the need for withdrawal.
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