November Employment Report – Main Topic on Wall Street This Friday

Pay close attention because a strong number could actually be viewed as a negative by investors who might see it as a reason for the Federal Reserve to accelerate its asset “taper” pace and perhaps raise rates sooner than anticipated.

 Federal Reserve

Fed Chair Jerome Powell has already indicated that the central bank is weighing a faster end to its bond buying program, with a decision expected as soon as its upcoming December 14-15 policy meeting. Investors will also be combing the report for signs that wage pressures might be starting to ease after hitting a year-over-year increase of +4.9% in October.

Analysts are also watching the labor force participation rate, which has risen from its pandemic lows but is still far below pre-pandemic levels. The ISM Services Index and Factory Orders are also due out today.

It’s worth noting that the Fed’s Beige Book yesterday noted that the wider availability of some raw materials, particularly semiconductors, has helped ease some price pressures. That fits ISM Manufacturing data earlier this week that showed a notable decrease in its Prices Paid Index and another drop in order backlogs.

 Inflation

Bulls are hoping for further signs of easing inflation from the Consumer Price Index coming up next Friday, which will also be a key influencer on the Fed’s policy decision.

The year-over-year inflation gauge hit +6.2% in October. That was led by significant jumps in motor fuel and energy costs. Consumers may soon feel some relief at the pump thanks to recent pressures on oil prices created by the new Omicron Covid variant and recent moves by OPEC and the U.S. OPEC yesterday somewhat surprised the trade with its decision to stick to planned monthly oil supply hikes, following recent threats to suspend the increases.

At the same time, the U.S. is said to be considering a delay in releasing supplies from strategic petroleum reserves, which is what sparked the production threats by OPEC in the first place. Deputy Energy Secretary David Turk said the U.S. may adjust the timing of the release but provided no further details. Some oil insiders view the developments as perhaps a sign that relations between the U.S. and OPEC leaders may be warming up a bit, which could open the door to greater cooperation as the global oil recovery continues.

Turning to next week, the economic calendar is very light with Productivity & Costs and Consumer Credit on Tuesday; JOLTS on Wednesday; and CPI and Consumer Sentiment on Friday. On the earnings front, next week’s highlights include AutoZone, Casey’s General Stores, ChargePoint, and Toll Brothers on Tuesday; Campbell Soup and GameStop on Wednesday; Broadcom, Chewy, Costco, Hormel, Lululemon, and Oracle on Thursday.

For a look at all of today’s economic events, check out our economic calendar.