Key events in developed markets next week

2018 was a great year for the US economy with strong growth, a robust jobs market and a pick-up in wages. However, 2019 faces more headwinds as the lagged effects of rising interest rates and the stronger dollar act as a break. The support from 2018's fiscal stimulus will also fade while concerns about global growth amidst intensifying trade protectionism will also weigh on activity.

Nonetheless, there is still decent momentum in the economy, which will be underlined by decent data in the first week of January. The release of the December jobs report is likely to see slightly slower job creation, but this is down to firms struggling to find suitable workers rather than a downturn in demand for labour. As a result, the price of labour will continue to inch upwards, with wage growth likely to rise quite nicely. At the same time, business and consumer surveys are likely to remain healthy, although could dip modestly this month given recent equity market weakness.

With inflation grinding higher due to shrinking spare capacity in the economy, we believe the Federal Reserve will continue to raise rates in 2019, a.lthough the pace will slow from the four 25bp hikes seen in 2018. We, like the Federal Reserve, think we are more likely to see just two hikes in 2019.

Canada’s unemployment rate should edge up slightly in December to 5.7%, but although this depicts a relatively healthy labour market, wage growth could soften the figure (again) if we see another deceleration.

Our medium-term growth outlook, and thus demand for labour, has been dampened slightly by Canada’s energy sector. Transportation constraints and inventory build-ups have triggered cutbacks in production. The central bank pointed out that the sector will be “materially weaker than expected” in their December press release.

Employment should be supported by the new non-medicinal cannabis market, legalised mid-October. The scope for growth is large and in turn so are hiring prospects - November saw an annual increase of 266% in cannabis-related jobs. This should help keep the unemployment rate relatively low.