The coming week will be busy, but two events will define the calendar. First, Fed Chair Ben Bernanke will deliver his semi-annual monetary policy testimony before the Senate on Tuesday and the House on Wednesday. Second, the February data on employment will be released on Friday. The common thread will be conditions in the labour market, upon which the outlook for monetary policy depends, and to a large extent the health and speed of the economic recovery.
There is a packed data calendar elsewhere, although the employment report on Friday will dominate market interest. Gains in payrolls will probably be modest, with private payrolls rising and government jobs falling at the state and local level. However, it is what will happen with the unemployment rate that is the biggest question mark. The rate dropped four-tenths in December to 9.4%, and then another four-tenths in January to 9.0%. It is unlikely to do so again in February, and may move up a notch. However, anything near the 9.0% rate is an improvement and should it inch lower, will be another step in the right direction.
The ADP National Employment Report for February on Wednesday will be watched for clues as to the direction of payrolls, but has had a couple of large misses in the last months. The Challenger Report on Wednesday will also be watched along with initial jobless claims on Thursday. The ISM indexes for manufacturing and non-manufacturing in February are due Tuesday and Thursday, respectively. Regional data from the Fed District Banks and Purchasing Managers associations indicate that activity has been solid in the factory sector. The Dallas Fed's Texas Manufacturing Survey for February is due on Monday, while the Chicago Purchasing Managers Business Barometer is due on Monday.
The data on January factory orders on Friday will be lost behind the employment report earlier in the morning. Automakers will report sales of domestically produced motor vehicles on Tuesday. Routine monetary policy announcements are due from the Reserve Bank of Australia Monday, Bank of Canada Tuesday, and ECB Thursday. Worries about gains in food and energy prices are beginning to manifest in the economic data, and just at a time when raising rates to cut off too-high inflation could curtail a sluggish recovery.
