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This week will provide markets with a lot of information to dissect, from the outcome of the Federal Open Market Committee meeting to key economic data on the state of the jobs market. The Federal Reserve (Fed) meeting is likely to end with the much-anticipated announcement that the Fed will begin tapering its purchases program of assets in December. The details of the Fed’s tapering plans and the language used to describe the current and anticipated state of the economy will be closely scrutinized.
Factors that will make the Fed’s job more difficult include the debate about the inflation pressures being seen in wages, home prices and energy prices, as well as the supply chain challenges that have only become more widespread rather than abating. I don’t expect the economic data provided over the next few months to help the Fed calm market fears about inflation.
Markets will also receive multiple pieces of economic data on the jobs market this week from both the ADP survey and October employment report. The expectation is for the jobs market to show growth, but at a slower pace than earlier this year. The unemployment rate should continue to fall due to new jobs and a shrinking workforce. Markets will be grappling with the question of whether changes in the jobs market due to the pandemic will be temporary or longer lasting. I expect the data to be stronger than expected, given the tight labor market and wage gains that we have seen.
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