Week’s Economic Schedule Highlighted by a Late Jobs Report

A 2-week delay on critical information due to the government shutdown

   
Week’s Economic Schedule Highlighted by a Late Jobs Report

Thanks to a last minute deal, the U.S. avoided hitting its debt ceiling, the government shutdown ended, and some of the delayed economic reports have been rescheduled.

The Bureau of Labor Statistics said it would finally publish the September jobs reports on Tuesday. New dates have also been set for the PPI, the CPI, the JOLTS, and the October jobs reports.

“The Census Bureau will publish its calendar of re-scheduled reports early in the week,” said UBS’s Sam Coffin. “Contacts there suggested that the new home sales report would be delayed but that the durables report would not.  Neither was certain, though.”

“Going forward, some surveys may not take place, potentially creating permanent gaps in the data records for this period,” warned Citi’s Peter D’Antonio.

Here’s your Monday Scouting Report:

Top Story

  • The Damage: The continuing resolution funds the government through January 15, and the debt ceiling agreement permits the Treasury to borrow normally through February 7.”We think the shutdown’s direct impact on 4Q GDP is likely to be minor,” said Credit Suisse’s Neal Soss. “While monthly data releases could show an impact, we believe much of the lost activity will be made up intra- quarter, particularly as the government will provide back pay for federal workers. As of now we have not changed our baseline economic forecasts.”

Economic Calendar

  • Existing Home Sales (Monday): Economists estimate that sales slipped to an annualized pace of 5.3 million in September. “Existing home sales rose unexpectedly in August as the upward move in mortgage rates encouraged further home buyer traffic,” said Wells Fargo’s John Silvia. “We continue to expect existing home sales to edge higher, although the pace of improvement may be uneven in the months ahead. Our expectation is that sales will pull back 3.1 percent to a 5.31 million unit pace in September. Given the leaner inventory levels, existing home price appreciation will likely continue to be strong.”
  • *Employment (Tuesday): Economists estimate that U.S. companies added 185,000 nonfarm payrolls, while the unemployment rate stayed at 7.3%. “There have been some encouraging signs there recently, with the Manpower employment outlook survey reaching its best level since 2007,” noted Morgan Stanley’s Ted Wieseman. “So we look for payroll growth to pick up in September after a more sluggish 148,000 average gain in the three months through August. Relative to the 169,000 gain in August, the main swing factors should be a positive reversal in the information category after an unusual 22,000 plunge in movie studio employment last month and, on the other side, a flattening out in local government teachers after a 20,000 rise in July probably reflected seasonal adjustment issues with summer break. Meanwhile, manufacturing jobs should add to last month’s rebound amid indications of a turn higher in factory output following weakness in the spring, but financial sector jobs will likely add to last month’s decline, as banks have continued to adjust to much lower levels of mortgage refinancing activity.”
  • Richmond Fed Index (Tuesday): Economists estimate that the regional index was unchanged at 0.
  • FHFA House Price Index (Wednesday): Economists estimate that prices increased by 0.8% in August.
  • Initial Unemployment Claims (Thursday): Economists estimate jobless claims fell to 335,000. “Initial jobless claims remained elevated in the latest period, though they fell to 358K from 374K,” said Credit Suisse’s Neal Soss. “However, special factors are at least partially to blame. California is still working through its backlog following a computer glitch. Also, contract employees who worked for the federal government supposedly accounted for a little less than 15K claims. We think it is probably more useful at this point to look at the six-week average through 12 October, which is at 325K, similar to the August average of 329K. The 325K number is our best guess for the underlying trend because it takes into account the up and down swings caused by the California computer glitch and the government shutdown volatility.”
  • Flash U.S. PMI (Thursday): Economists estimate the preliminary PMI reading for October slipped to 52.7 in October.
  • *Job Openings And Labor Turnover (Thursday): Economists estimate that job openings increased to 3.725 million in August.
  • *New Home Sales (Thursday): Economists estimate sales slipped to an annualized pace of 420,000 in September. It’s unclear when this report will be released.
  • Kansas City Fed Manufacturing Index (Thursday): Economists estimate the regional index was unchanged at 2.
  • *Durable Goods Orders (Friday): Economists estimate orders growth accelerated to 2.5% in September and 0.5% excluding transportation. “Powered by a sharp acceleration in transportation equipment requisitions, durable goods orders probably jumped by 5.3% in September – the largest advance in four months,” said Societe Generale’s optimist Brian Jones. “Closely followed nondefense capital goods readings excluding commercial aircraft likely will add to the positive tone. Core nondefense capital goods orders are forecast to climb by 1.1%, following a 1.5% prior-month gain.”
  • Consumer Sentiment (Friday): Economists the University of Michigan’s measure of confidence slipped to 74.8 in October. “We estimate a slight rise post-shutdown,” said UBS’s Coffin.
  • *Delayed or rescheduled data. Eventually, the government data agencies will reschedule reports on August construction spending, August factory orders, August trade balance, September retail sales, and September industrial production.

Market Commentary

“We have likely avoided a default, a binary outcome that posed great risk to our thesis (even if the likelihood of a negative outcome was small, in our view),” said JP Morgan’s Tom Lee. Lee believes the path is clear for the S&P 500 to head to 1,775.

“The latest agreement though, only punts an immediate risk to a few short months away and thus should not give rise to much optimism,” warned Citi’s Tobias Levkovich who sees the S&P 500 ending the year at 1,650. “Investors typically do not like uncertainty and it is hard to determine how these recent almost non-decisions can be seen as reinvigorating confidence aside from some relief that an imminent likely disaster has been avoided. Nonetheless, one cannot respectably believe that things truly have turned for the better as opposed to averting the worst.”


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