Investors in the U.S. stock market will be watching Friday’s jobs report closely with a hope that any signs of weakness in the labor market could give the Federal Reserve more room to go easy with its next interest-rate hike in two weeks.
Powell said Tuesday that the central bank may need to raise interest rates higher than expected in response to recent strong economic data, while emphasizing that monetary policy decisions will remain “data dependent.” A day later, he said no decision has been made on the potential size of interest-rate hike in March.
Investors hope a “softer” employment report on Friday could alter monetary policy expectations and get the Fed to take a lighter touch in raising interest rates. “The potential for a ‘soft’ jobs number or cooler inflation trend can work to reset the narrative into the upcoming Fed meeting. We see a good chance of those two indicators surprising to the downside,” wrote Dan Victor, an associate at Posto Asset Management, in a Thursday note.
Meanwhile, the magnitude of deterioration in the labor market might not be large enough to alter the rate consensus or even reset market policy expectations, said Sven Schubert, head of macro research of Vontobel’s Vescore Boutique in Zurich, Switzerland.
Do you know what time the numbers come out tomorrow?