SOMKID THONGDEE
A recent surge in fear that the U.S. economy is heading into a recession has subsided, but investors this week will scrutinize a labor-market report to determine if their initial concerns about the economy were on target, according to LPL Financial.
The Bureau of Labor Statistics (BLS) is slated to release the 2024 Preliminary Benchmark Revision to Establishment Data that will include non-farm payroll data from April 2023 to March 2024. Investors have taken note that Federal Reserve Chair Jerome Powell has increasingly invoked the Fed’s maximum employment mandate when discussing monetary policy, LPL Financial said Monday. The revision will arrive before Thursday’s start of the Fed’s annual symposium in Jackson Hole, Wyoming.
“Markets, having recently experienced a growth scare that led to concerns that the Fed is behind the curve, will be monitoring Wednesday’s release of the benchmark revision to see if the market’s initial reaction was, in fact, correct,” Quincy Krosby, chief global strategist at LPL Financial, said in a note.
“Should the [BLS’ benchmark revision report] reveal a considerably smaller number of jobs that were created than were initially announced in monthly payroll reports, the Fed Chair’s concerns could be amplified in his comments,” she said.
The S&P 500 (SP500) has been recovering after sliding more than 8% from its all-time high in July, rocked by recession worries. Recent weekly initial claims for unemployment benefits – a notable proxy for labor market trends – have helped soothed recession concerns. But continuing claims “point to difficulties” in securing new jobs in the country’s workforce,” Krosby said.
“Powell has indicated that the Fed is monitoring the labor market carefully for indications of deterioration and stands ready to intervene if necessary,” she said.
BLS said each year, establishment survey estimates are benchmarked to comprehensive counts of employment from the Quarterly Census of Employment and Wages (QCEW) for the month of March.
Stephen Stanley, chief U.S. economist at Santander U.S., published a primer about the benchmark payroll revision late last week. “As I see it, a noticeable downward revision seems likely, but its magnitude could be moderate (as was the case a year ago) or substantial,” he said.
“Moreover, while it is simple enough to extrapolate forward, a negative revision that extends from April 2023 through March 2024 does not necessarily tell us anything about the current state of the labor market,” Stanley said.
Investors can use ETFs such as (SPY), (VOO), (IVV), (QQQ), (TQQQ), (DIA), and (DOG) to monitor U.S. stock benchmarks.
