Key events in the developed markets next week

The key report to watch next week will be the US jobs release. Nonfarm payrolls are expected to post another sizeable increase of over 500,000 given that we know there is unsatiated demand out there for workers and we are hopeful that the supply of potential staff is increasing.

On the demand side, the economy is growing strongly and there are already more than 10 million vacancies right now. Supply has been the big problem with labour force participation the lowest since the 1970s. Now that schools are back to in-person tuition and extended unemployment benefits have ended, we should be seeing more and more people coming back to search for work. However, with household wealth having increased substantially through the pandemic due to government income support programmes and surging equity markets, there may be a financial buffer that some individuals are running down rather than choosing to find work at this time. Consequently, we continue to expect demand to outstrip supply for workers which will keep upside pressure on wages.

We will also see the ISM manufacturing and service sector reports, which should confirm the strength in the economy while also highlighting the intensity of price pressures in the economy. With the economy likely to grow in excess of 6% annualised in the current quarter and inflation to average around 6.5%, the case for a swifter path to policy “normalisation” is strong. This raises the prospect that the Federal Reserve accelerates QE tapering, which could be announced as soon as the 15 December FOMC meeting.