The commencement of the Federal Reserve’s blackout period is underway. The Federal Open Mouth Committee is set to maintain radio silence until after the forthcoming FOMC meeting on December 12-13. The economic indicators slated for this week are poised to sway their sentiment, providing assurance that the robust labor market is undergoing a desired cooling without veering into recession territory. Furthermore, the week’s inflation metrics are anticipated to affirm a moderation trend, aligning with their expectations of economic stability. Consequently, the likelihood of the committee maintaining a status quo for the third consecutive meeting is high, prompting contemplation of a well-deserved break for the rest of the month. The financial markets, both stocks, and bonds, have already factored in our envisioned “immaculate disinflation” scenario during the preceding month, with expectations of continued Santa Claus rallies throughout December.

 

 

On the employment horizon, the week commences with the release of October’s JOLTS report on Tuesday. Indications from comparable sources suggest that job openings persisted at a high level, hovering around 9.5 million.

As we approach Friday, the spotlight shifts to November’s employment report, expected to unveil a robust gain of approximately 180,000 jobs, notably driven by the return of autoworkers following their recent strike. Despite this positive outlook, signals from continuing unemployment claims and the jobs-hard-to-get series point towards a potential uptick in the unemployment rate for November. Wage inflation, on the other hand, is likely to sustain its moderating trend during the same period.

Wednesday brings the revised report on Q3 productivity and labor costs, which has the potential to influence stock and bond prices similarly to the preliminary report from the previous month. The initial findings indicated a notable uptick in productivity at 4.7% (saar), accompanied by a 0.8% decline in unit labor costs (ULC). Expectations are that the revision may see an upward adjustment in productivity and a corresponding downward revision in ULC, given the upward revision of real GDP for Q3. The year-over-year ULC, a determinant of underlying inflation, stood at a modest 1.9% during Q3 and could see a downward revision.