Key Events This Week: Payrolls, PMIs And Presidential Debate Tyler Durden Mon, 09/28/2020 - 09:20 As we wave goodbye to the third quarter and welcome Q4, which for once everyone can agree will begin on Thursday, politics will move increasingly into the spotlight for investors according to DB's Jim Reid who reminds us that tomorrow features the first presidential debate in the US. This comes in what is likely to be a febrile atmosphere after the expected weekend announcement of President Trump’s pick for the Supreme Court. Staying with politics we’ll see the resumption of Brexit negotiations between the UK and the EU. In data terms the US jobs report on Friday, the ADP report on Wednesday and global manufacturing PMIs on Thursday will be the keys. Going into more detail now and tomorrow we see the much-anticipated first debate between Trump and Biden. This will be the first time that the candidates have directly debated each other, and will last for 90 minutes, with the debate divided into six segments. We’ve already been informed that subject to new developments, the topics will be: the Trump and Biden records; the Supreme Court; Covid-19; the economy; race and violence in our cities; and the integrity of the election. The New York Times report over the weekend on the President’s tax returns, which he had avoided disclosing in the 2016 race, as well throughout his first term in office, is quite likely to make an appearance as well. This is the first of three debates between the two, with the others taking place on October 15 and 22, and a debate between the Vice Presidential candidates taking place as well on October 7. Heading into this debate, Trump picked Amy Coney Barrett to be his choice for the vacant US Supreme Court seat. Confirmation hearings are expected to start on October 12th with a full Senate vote possible by October 26th and just before the election. As has been well flagged this could turn the Supreme Court 6-3 in favour of the Republicans and could have legal ramifications for the US for a generation. And as has also been well flagged, this nomination is highly contentious this close to an election with the Democrats looking at all options to address the balance if they win the White House and Senate in November - assuming the nomination goes through before a new Senate is seated in January. Elsewhere in the US we get the September jobs report on Friday, which will be the last report we get before Election Day. In August, the unemployment rate fell to a lower-than-expected 8.4%, and the consensus is looking for a further decline to 8.2 % in September. In terms of non-farm payrolls, the consensus is looking for job growth of +865k, but it’s worth bearing in mind that having lost over -22MM jobs in March and April, even this figure would mean that just over half of them have been recovered, still leaving nonfarm payrolls over 10MM below their peak back in February. The other important data release to watch out for next week will be the release of the manufacturing PMIs and the ISM manufacturing index on Thursday. The flash readings we’ve already had generally showed manufacturing holding up relative to expectations, whereas the services readings disappointed, possibly as hospitality/entertainment related industries start to see heightened restrictions again. For example in the Euro Area, the flash manufacturing PMI rose to 53.7, which was its highest reading since August 2018 but the services reading was down to 47.6 from 50.5 last month. A visual summary of the events this week is shown in the table below: Elsewhere, a special European Council meeting of EU leaders will take place on Thursday and Friday. This was originally meant to have taken place the previous week, but was postponed after European Council President Michel had to self-isolate after coming into contact with a security officer who tested positive. In terms of the agenda, there are a number of items, including relations with Turkey and the situation in the Eastern Mediterranean, as well as relations with China. Here is a summary breakdown of key events by day courtesy of Deustche Bank: Monday September 28 Data: Japan final July leading index, US September Dallas Fed manufacturing index Central Banks: ECB President Lagarde, ECB’s Schnabel and Fed’s Mester speak Politics: Brexit talks between the UK and the EU resume Tuesday September 29 Data: France September consumer confidence, UK August mortgage approvals, Euro Area final September consumer confidence, Germany preliminary September CPI, US preliminary August wholesale inventories, September Conference Board consumer confidence Central Banks: Bank of Japan release Summary of Opinions from September meeting, Fed Vice Chair Quarles, Vice Chair Clarida, Williams and Harker speak Politics: US Presidential Debate Wednesday September 30 Data: Japan August retail sales, housing starts, preliminary August industrial production, final August machine tool orders, July vehicle production, China September composite PMI, manufacturing PMI, non-manufacturing PMI, UK final Q2 GDP, France preliminary September CPI, Germany September unemployment change, Italy preliminary September CPI, US September ADP employment change, MNI Chicago PMI, third Q2 GDP reading, August pending home sales, Canada July GDP Central Banks: ECB President Lagarde, ECB’s Lane and Rehn, Fed’s Kashkari and Bowman speak Thursday October 1 Data: September manufacturing PMIs from Australia, Indonesia, Japan, India, Russia, Turkey, Italy, France, Germany, Euro Area, UK, South Africa, Brazil, Canada, US and Mexico, Japan September vehicle sales, Italy preliminary August unemployment rate, Euro Area August PPI, unemployment rate, US weekly initial jobless claims, August personal income, personal spending, construction spending, September ISM manufacturing Central Banks: Reserve Bank of India monetary policy decision, ECB’s Lane, Fed’s Williams and Bowman speak Politics: Special European Council summit begins Friday October 2 Data: Japan August jobless rate, September monetary base, Euro Area September flash CPI, US September change in nonfarm payrolls, unemployment rate, average hourly earnings, final September University of Michigan consumer sentiment index, August factory orders, final August durable goods orders, nondefence capital goods orders ex air Central Banks: ECB’s Holzmann and Fed’s Harker speak Politics: Special European Council summit concludes * * * Finally, looking at just the US, economic data releases this week are the ISM manufacturing index on Thursday and the employment report on Friday. There are numerous scheduled speaking engagements by Fed officials this week. Monday, September 28 10:30 AM Dallas Fed manufacturing index, September (consensus 9.5, last 8.0) 02:00 PM Cleveland Fed President Mester (FOMC voter) speaks: Cleveland Fed President Loretta Mester will participate in a webinar hosted by the African American Chamber of Commerce of Western Pennsylvania. Prepared text and audience Q&A are expected. Tuesday, September 29 08:25 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will speak at a webinar for the 2020 US Treasury Market Conference. Prepared text is expected. 08:30 AM Advance goods trade balance, August (GS -$81.0BN, consensus -$81.8BN, last -$80.1BN): We estimate that the goods trade deficit decreased by $0.9BN to $81.0BN in August compared to the final July report, as both exports and imports likely rose further. 08:30 AM Wholesale inventories, August preliminary (consensus -0.1%, last -0.3%) 09:00 AM S&P/Case-Shiller 20-city home price index, July (GS +0.2%, consensus +0.10%, last flat): We estimate the S&P/Case-Shiller 20-city home price index increased by 0.2% in July, following an unchanged level in June. 09:30 AM Philadelphia Fed President Harker (FOMC voter) speaks: Philadelphia Fed President Patrick Harker will take part in a virtual discussion on machine learning hosted by the Official Monetary and Financial Institutions Forum. Prepared text and audience Q&A are expected. 10:00 AM Conference Board consumer confidence, September (GS 91.0, consensus 90.0, last 84.8): We estimate that the Conference Board consumer confidence index increased by 6.2pt to 91.0 in September based on improvements in other consumer confidence measures, including our GS Twitter Economic Sentiment Index. 11:40 AM Fed Vice Chair Clarida (FOMC voter) speaks: Fed Vice Chair Richard Clarida will moderate a discussion on “Future Considerations for Treasury Market Resilience” hosted by the New York Fed. 01:00 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will speak at a virtual event hosted by the Policy Advisory Board at the Fisher Center for Real Estate and Economics. 01:00 PM Fed Governor Quarles (FOMC voter) speaks: Fed Vice Chair for Supervision Randal Quarles will participate in a panel on financial regulation hosted by Harvard Law School and the Program on International Financial Systems. 03:00 PM Fed Governor Quarles (FOMC voter) speaks: Fed Vice Chair for Supervision Randal Quarles will speak about financial stability at a webinar hosted by the University of Maryland. Audience Q&A is expected. Wednesday, September 30 08:15 AM ADP employment report, September (GS +650k, consensus +630k, last +428k): We expect a 650k gain in ADP payroll employment – below our forecast of +1,200k for private payrolls in the Bureau of Labor Statistics report – reflecting drags from the other inputs of the ADP model. 08:30 AM GDP, Q2 third (GS -31.7%, consensus -31.7%, last -31.7%): Personal consumption, Q2 third (GS -34.1%, consensus -34.1%, last -34.1%); We expect no revision on net to Q2 GDP in the third vintage (previously reported at -31.7% qoq ar). 09:45 AM Chicago PMI, September (GS 53.0, consensus 52.0, last 51.2): We estimate that the Chicago PMI increased by 1.7pt to 53.0 in September — following a 0.7pt decline in August — reflecting firmer manufacturing surveys on net so far in the month. 10:00 AM Pending home sales, August (GS +6.0%, consensus +3.0%, last +5.9%): We estimate that pending home sales rose by 6.0% in August based on regional home sales data, following a 5.9% increase in July. We have found pending home sales to be a useful leading indicator of existing home sales with a one-to-two-month lag. 11:00 AM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will discuss COVID-19 and the economy at a virtual forum hosted by the Wisconsin Manufacturers and Commerce. 01:40 PM Fed Governor Bowman (FOMC voter) speaks: Fed Governor Michelle Bowman will speak on community banking at a conference hosted by the St. Louis Fed. Prepared text and audience Q&A are expected. Thursday, October 1 08:30 AM Initial jobless claims, week ended September 26 (GS 875k, consensus 850k, last 870k); Continuing jobless claims, week ended September 19 (consensus 12,250k, last 12,580k); We estimate initial jobless claims increased to 875k in the week ended September 26. We see large, two-sided risks around this week’s initial claims forecast due to California’s two week pause in new claim applications. 08:30 AM Personal income, August (GS -2.0%, consensus -2.5%, last +0.4%); Personal spending, August (GS +1.0% consensus +0.8%, last +1.9%); PCE price index, August (GS +0.31%, consensus +0.3%, last +0.32%); Core PCE price index, August (GS +0.33%, consensus +0.3%, last +0.35%); PCE price index (yoy), August (GS +1.25%, consensus +1.2%, last +1.00%); Core PCE price index (yoy), August (GS +1.44%, consensus +1.4%, last +1.25%): Based on details in the PPI, CPI, and import price reports, we forecast that the core PCE price index rose by 0.33% month-over-month in August, corresponding to a 1.44% increase from a year earlier. Additionally, we expect that the headline PCE price index increased by 0.31% in August, corresponding to a 1.25% increase from a year earlier. We expect a 2.0% decrease in personal income in August and a 1.0% increase in personal spending. 09:45 AM Markit US manufacturing PMI, September final (consensus 53.5, last 53.5) 10:00 AM ISM manufacturing index, September (GS 56.5, consensus 56.3, last 56.0): We expect the ISM manufacturing index to edge up by 0.5pt to 56.5 in the September report. Our manufacturing survey tracker for September increased by 1.0pt to 56.4. 10:00 AM Construction spending, August (GS +0.7%, consensus +0.7%, last +0.1%): We estimate a 0.7% increase in construction spending in August, with scope for increases in private residential and public construction. 11:00 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will moderate a virtual discussion with Merck CEO Kenneth Frazier hosted by the Economic Club of New York. 11:00 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will deliver pre-recorded remarks at the New York Fed Research Conference on FinTech. 03:00 PM Fed Governor Bowman (FOMC voter) speaks: Fed Governor Michelle Bowman will speak on community banking at an event hosted by the Montana State University Jake Jabs College of Business and Entrepreneurship. Prepared text and audience Q&A are expected. 05:00 PM Lightweight motor vehicle sales, September (GS 15.0m, consensus 15.6m, last 15.2m) Friday, October 2 08:30 AM Nonfarm payroll employment, September (GS +1,100k, consensus +850k, last +1,371k); Private payroll employment, September (GS +1,200k, consensus +850k, last +1,027k); Average hourly earnings (mom), September (GS +0.1%, consensus +0.2%, last +0.4%); Average hourly earnings (yoy), September (GS +4.8%, consensus +4.5%, last +4.7%); Unemployment rate, September (GS 8.1%, consensus 8.2%, last 8.4%): We estimate nonfarm payroll growth rose +1.1mn in September after +1.4mn in August. The resurgence of the coronavirus did not halt the sharp rebound in payrolls over the summer, and the second-derivative improvement of the public-health situation coupled with favorable readings of jobless claims and alternative labor market indicators is consistent with another sizable gain in the nonfarm measure. On the negative side, we expect the start of the school year to lower seasonally adjusted education payrolls by 200-300k (public + private), as many janitors and support staff did not return to work as usual. The inability to obtain childcare is also likely to weigh on job creation at the margin, though its effect may already be mostly reflected in the August payroll levels (given the cancellation of some in-person summer camps and an earlier reduction in childcare provider availability). We also expect a roughly 50k drag to government payrolls from the start of the wind-down of Census canvassing activities (we estimate private payrolls rose 1.2mn). We estimate the unemployment rate declined by three tenths to 8.1%, reflecting another increase in household employment partially offset by higher labor force participation. We estimate average hourly earnings rose 0.1% month-over-month, boosting the year-on-year rate by a tenth to 4.8%. This forecast reflects a continuing unwind of the composition shift from lower to higher paid workers as well as negative calendar effects. 09:00 AM Philadelphia Fed President Harker (FOMC voter) speaks: Philadelphia Fed President Patrick Harker will take part in a virtual discussion on an inclusive workforce recovery. Prepared text and audience Q&A are expected. 10:00 AM University of Michigan consumer sentiment, September final (GS 79.0, consensus 78.9, last 78.9): We expect the University of Michigan consumer sentiment index to edge 0.1pt higher from the preliminary estimate for September, in which the index rose by 4.8pt. The report’s measure of 5- to 10-year inflation expectations declined by one tenth to 2.6% in the preliminary report. 10:00 AM Factory orders, August (GS +1.2%, consensus +1.0%, last +6.4%); Durable goods orders, August final (last +0.4%); Durable goods orders ex-transportation, August final (last +0.4%); Core capital goods orders, August final (last +1.8%); Core capital goods shipments, August final (last +1.5%): We estimate factory orders increased by 1.2% in August following a 6.4% increase in July. Durable goods orders rose by 0.4% in the August advance report, and core capital goods orders rose by 1.8%. Source: Goldman, Deutsche Bank, BofA