Key events in developed markets next week

With the US celebrating Independence Day it is a shortened trading week that will also see only a limited selection of data releases. The ISM services index is probably the premier number and should show the sector is growing very strongly with increased business opportunities thanks to the reopening. However, as with the manufacturing survey, it will highlight the lack of suitable workers that are available for recruitment.

This story will be reinforced by the JOLT – Job Opening and Labour Turnover – report. It is likely to show a new record for job openings, but that hiring continues to lag far behind given potential workers are either unable or unwilling to take a job. Childcare issues, extended unemployment benefits and upwards of two million people having taken early retirement mean that the pool of available labour is small right now. Consequently, if firms want to expand to take advantage of the strong growth environment, they will need to pay higher wages to attract staff.

This is already showing up in the “quits” data with 3.1% of all private sector workers having quit their job last month to move to a new employer. We expect a new record high to be seen in the latest JOLTs report. Consequently, businesses are not only having problems recruiting, but an increasing number are having problems with staff retention. This adds to our belief that wage pressures will gradually build in the US economy.

In Canada, we have the jobs report for June. Some Covid containment measures are being eased after reintroduction in April but given the timing of the data collection we don’t expect to see much strength in the jobs report this time round. The July release will, however, show much improvement, with Canada at the top of the league table for the proportion of the population having the first dose of the vaccine.

In the fast-moving world of Covid-19, May’s UK GDP figures now look a little outdated. We expect another solid increase in growth, albeit at a steadier pace than in April. This is essentially because the reopenings in May (indoor hospitality) were a little less impactful from a growth perspective than those in April (shops, outdoor hospitality and recreation). Nevertheless, it was clear through May that confidence had really returned, and consumers were more comfortable with socialising once more. That still seems to be the case, though many of the high frequency numbers have plateaued over recent weeks. Further gains rely on the Delta variant going into retreat, which looks unlikely in the near-term. Cases are rocketing, even if hospitalisations are surprisingly stable, and the risk is that consumers become more risk-averse again over coming weeks. We expect growth to slow from above 5% in the second quarter to a little below 2% in the third.