The jobs report for January highlights a busy week of economic news. Most economists expect continued solid gains in employment this year despite a low unemployment rate that’s spelling fewer available workers. Readings of consumer spending and confidence as well as manufacturing activity should help round out a snapshot of an economy that’s been firing on all cylinders lately. And the Federal Reserve meets, though policymakers aren’t expected to raise interest rates.
Americans have been splurging and there’s no sign they pulled back in December. Retail sales posted a healthy gain last month, punctuated by the best holiday sales season since 2005, and the cold weather likely boosted spending on utilities, says Nomura economist Lewis Alexander. Consumers have been buoyed by solid job and income growth and record high stock prices. Economists estimate the Commerce Department will announce Monday that consumption rose a sturdy 0.5% in December.
A possible signal of spending in the months ahead is consumer confidence and that’s been skyrocketing too as a result of the strong labor market and roaring stocks. After hitting a 17-year high in November, a closely watched index of consumer confidence fell moderately last month but remained elevated. The Republican tax cuts may have soured the mood of some Democrats and independents. But economists still expect the Conference Board on Tuesday to report that its consumer confidence index edged higher in January.
The Fed raised interest rates last month for the third time in 2017, so no one is expecting another hike at a two-day meeting that ends Wednesday. Fed officials have vowed to raise rates gradually, which has meant pausing every other meeting or so. The only drama will be in the Fed’s description of the economy and inflation. As long as it remains fairly upbeat, markets will assume a March rate hike is likely. The meeting is probably the last led by Fed Chair Janet Yellen. Republican Fed Governor Jerome Powell is set to replace her in February.
On Thursday, the Institute for Supply Management releases its latest index of manufacturing activity. Manufacturers have enjoyed a renaissance on the back of the oil industry’s revival and a resurgent global economy. Economists expect ISM to announce Thursday that its index of factory activity dipped slightly in January but still reflected strong gains.
Job growth has slowed the past couple of years as low unemployment — currently 4.1% — has provided employers a shrinking pool of available workers. Still, average monthly increases of 171,000 in 2017 were well more than enough to continue lowering the unemployment rate. Many economists expect the pace to slow to about 160,000 this year. But they’re predicting the Labor Department on Friday will report a solid 188,000 job gains for January.