Today's FOMC Statement was modestly hawkish, but Yellen's rationale for not tightening at this meeting is very bullish for the stock market.
1. The Statement was modestly hawkish, as it acknowledged that "the case for an increase in the federal funds rate has strengthened."
2. But, Yellen's rationale for not tightening at this meeting is very bullish for the stock market, as it was pro-growth. It echoed Fed Governor Brainard's point last week that the labor market is not tightening even with strong job growth. In other words, labor market capacity has been expanding, as more people are being drawn back into the labor market, and thus should accommodate continued decent growth without creating inflationary pressures.
a. In her prepared remarks, Yellen emphasized that the steady 4.9% Unemployment Rate in the face of strong Payroll gains allowed the Fed to tolerate economic growth, presumably 2+% GDP, and thus allowed the Fed not to hike today.
b. The Fed's projections have the Unemployment Rate falling to 4.8% in Q416, 4.6% in Q417, and 4.5% in Q418. Moreover, these projections see a higher funds rate in each of these years.
c. This suggests that as long as the Unemployment Rate remains in
the 4.9-5.0% range, the Fed may very well continue to refrain from
hiking the funds rate.
d. And, continuing decent GDP growth is a positive for the profits outlook.
Wednesday, September 21, 2016
Sunday, September 18, 2016
The September FOMC Meeting and the Markets' Outlook
Market participants are debating whether Treasury yields will fall or rise in the next few months and whether the stock market will break above their range. The FOMC Statement on Wednesday may determine which side of the debate is right. Here's why I think the Statement risks keeping Treasury yields in the recently high range and stocks range bound.
Consensus and I expect the Fed to refrain from hiking rates at this week's FOMC Meeting. But, the Statement is the key to how the markets will trade afterwards, and it risks being hawkish -- saying, in line with Yellen's Jackson Hole Speech, that the labor market is approaching full employment and inflation is approaching the Fed's target. The combination of no hike and a hawkish Statement could be a compromise between the hawks and doves on the FOMC.
A hawkish Statement would likely result in knee-jerk selling of Treasuries and stocks, as it would make the markets think a December rate hike is in play. Such sell-offs tend to be overdone, however, and this case should not be an exception -- the December FOMC Meeting is far off and nothing is guaranteed. Indeed, early considerations suggest most key US economic data in the next month or so will be strong enough to keep the risk of a December hike alive in the markets, but not strong enough to eliminate all doubt. So, after the initial reaction and volatility, Treasury yields would likely stay in their recently higher range and stocks remain in their range.
1. Generally, the risk is that US economic data pertaining to September and October will strengthen as the weather returns to normal after a very hot August.
a. In particular, Ex Auto Retail Sales should post gains, after having fallen in July and August.
2. September Nonfarm Payrolls should remain moderate, around 150k, as the Claims data show little change since the August Survey Week. (Such a moderation in Payrolls happened in August-September last year, as well). Fed hawks, such as Williams, view this pace of net job creation as strong enough to warrant higher rates. But Fed doves, like Brainard, are not convinced.
3. Similarly, the September Unemployment Rate should be little changed from August's 4.9%.
a. But, an uptick in the Unemployment Rate to 5.0% cannot be ruled out. The Rate was 4.922% in August (up from 4.88% in July), so a small uptick could round to 5.0% -- which would have a positive headline effect on Treasuries and stocks.
4. In a broad sense, Q416 Real GDP Growth could slow to under 2.0% -- in line with the early forecast of the NY Fed's nowcast model and consistent with the tightening of bank lending standards in mid year -- but the q/q slowdown could mask a modest speedup in economic activity during the quarter.
a. A speedup during the quarter could lead to a pickup in Q117 Real GDP Growth. The renewed move up in the ECRI Leading Index in the past couple of weeks supports this possibility. But, winter weather plays the most important role in determining the strength of GDP growth in the Q1 of a year.
b. Note that the Atlanta Fed's nowcast model's forecast of Q316 GDP fell to 3.0% from 3.3% after last week's data releases. The NY Fed's model had been projecting 2.8% for Q316 but will not be updated until next Friday (as it refrained from doing so ahead of the FOMC Meeting).
Upcoming inflation-related data could feed into the hawks' camp.
1. Average Hourly Earnings risk printing an above-trend 0.3% m/m for both September and October, based on calendar considerations. The y/y would return to its recent high of 2.6% in the October Employment Report. But, AHE should slow to 0.1% m/m and 2.4% y/y in the November Report (due in early December), based on calendar consideration.
2. Whether the Core CPI prints 0.3% m/m in September, as in August, is a tough call. A number of the components that rose notably in August could be one-off -- just snapbacks from declines in June and July -- so could soften in September. But, the bi-monthly sampling for the CPI means that some of the increases -- such as for the EpiPen -- could be captured in the September CPI survey as well as in the August survey.
3. But, the August Core PCE Deflator is likely to weaker than the 0.3% m/m Core CPI as a result of differences in composition and definition.
Aside from the US economic data, the outlook for fiscal policy may be clearer at the December FOMC Meeting. Expectations of large fiscal stimulus -- if Trump wins -- or even moderate fiscal stimulus -- if Clinton wins -- could encourage the Fed to hike.
a. Note that the sell-off in German Bunds has been attributed to the ECB failing to extend its bond buying program. But, it also could be attributed to the ECB pushing the European countries to boost fiscal stimulus.
b. I continue to think that aggressive fiscal stimulus is the major downside risk for Treasury prices.
Consensus and I expect the Fed to refrain from hiking rates at this week's FOMC Meeting. But, the Statement is the key to how the markets will trade afterwards, and it risks being hawkish -- saying, in line with Yellen's Jackson Hole Speech, that the labor market is approaching full employment and inflation is approaching the Fed's target. The combination of no hike and a hawkish Statement could be a compromise between the hawks and doves on the FOMC.
A hawkish Statement would likely result in knee-jerk selling of Treasuries and stocks, as it would make the markets think a December rate hike is in play. Such sell-offs tend to be overdone, however, and this case should not be an exception -- the December FOMC Meeting is far off and nothing is guaranteed. Indeed, early considerations suggest most key US economic data in the next month or so will be strong enough to keep the risk of a December hike alive in the markets, but not strong enough to eliminate all doubt. So, after the initial reaction and volatility, Treasury yields would likely stay in their recently higher range and stocks remain in their range.
1. Generally, the risk is that US economic data pertaining to September and October will strengthen as the weather returns to normal after a very hot August.
a. In particular, Ex Auto Retail Sales should post gains, after having fallen in July and August.
2. September Nonfarm Payrolls should remain moderate, around 150k, as the Claims data show little change since the August Survey Week. (Such a moderation in Payrolls happened in August-September last year, as well). Fed hawks, such as Williams, view this pace of net job creation as strong enough to warrant higher rates. But Fed doves, like Brainard, are not convinced.
3. Similarly, the September Unemployment Rate should be little changed from August's 4.9%.
a. But, an uptick in the Unemployment Rate to 5.0% cannot be ruled out. The Rate was 4.922% in August (up from 4.88% in July), so a small uptick could round to 5.0% -- which would have a positive headline effect on Treasuries and stocks.
4. In a broad sense, Q416 Real GDP Growth could slow to under 2.0% -- in line with the early forecast of the NY Fed's nowcast model and consistent with the tightening of bank lending standards in mid year -- but the q/q slowdown could mask a modest speedup in economic activity during the quarter.
a. A speedup during the quarter could lead to a pickup in Q117 Real GDP Growth. The renewed move up in the ECRI Leading Index in the past couple of weeks supports this possibility. But, winter weather plays the most important role in determining the strength of GDP growth in the Q1 of a year.
b. Note that the Atlanta Fed's nowcast model's forecast of Q316 GDP fell to 3.0% from 3.3% after last week's data releases. The NY Fed's model had been projecting 2.8% for Q316 but will not be updated until next Friday (as it refrained from doing so ahead of the FOMC Meeting).
Upcoming inflation-related data could feed into the hawks' camp.
1. Average Hourly Earnings risk printing an above-trend 0.3% m/m for both September and October, based on calendar considerations. The y/y would return to its recent high of 2.6% in the October Employment Report. But, AHE should slow to 0.1% m/m and 2.4% y/y in the November Report (due in early December), based on calendar consideration.
2. Whether the Core CPI prints 0.3% m/m in September, as in August, is a tough call. A number of the components that rose notably in August could be one-off -- just snapbacks from declines in June and July -- so could soften in September. But, the bi-monthly sampling for the CPI means that some of the increases -- such as for the EpiPen -- could be captured in the September CPI survey as well as in the August survey.
3. But, the August Core PCE Deflator is likely to weaker than the 0.3% m/m Core CPI as a result of differences in composition and definition.
Aside from the US economic data, the outlook for fiscal policy may be clearer at the December FOMC Meeting. Expectations of large fiscal stimulus -- if Trump wins -- or even moderate fiscal stimulus -- if Clinton wins -- could encourage the Fed to hike.
a. Note that the sell-off in German Bunds has been attributed to the ECB failing to extend its bond buying program. But, it also could be attributed to the ECB pushing the European countries to boost fiscal stimulus.
b. I continue to think that aggressive fiscal stimulus is the major downside risk for Treasury prices.
Thursday, September 15, 2016
Today's Soft Data Argue Against a Fed Rate Hike
Today's data on August Retail Sales and Industrial Production were weaker than consensus -- in line with the risks I highlighted in a prior blog -- and argue against a Fed rate hike next week. The Atltanta Fed's model will likely lower its nowcast of Q316 Real GDP Growth from the latest 3.3% forecast. While the worst of the soft patch may be over, it does not look like there will be a strong bounce, if any.
1. August Retail Sales fell both in Total (-0.3% m/m) and Ex Auto (-0.1% m/m) and followed downward revisions to both June and July.
a. Consensus for August Retail Sales was -0.1% and +0.2%, respectively.
2. August Industrial Production fell 0.4% m/m, weaker than the -0.3% consensus.
a. Importantly, Manufacturing Output also fell 0.4% m/m -- despite a rebound in motor vehicle assemblies -- and followed downward revised gains in June and July. Fed hawks had cited the June-July gains when they upped their rhetoric a few weeks ago.
3. While the Phil Fed Mfg Index jumped to +12.8 in September from +2 in August, the bulk of the details weakened.
a. An average of the components that map into the Mfg ISM fell in September.
b. Note that the overall Phil Fed Index reflects answers to a question about overall business conditions. The details are more company specific, as they regard orders, production, inventories, employment, etc. Companies should be more knowledgeable about the latter than the former.
4. The Claims data suggest the worst of the soft patch may be over. Both Initial and Continuing barely moved up in the latest week, suggesting that the hurricane-related bad weather in parts of the country did not significantly depress them in the prior week. Both are slightly below their respective August average.
5. The August PPI showed no inflation in the headline prints -- 0.0% m/m Total and +0.1% m/m Core. Consensus was 0.1% m/m for both.
a. Excluding the dubious Trade Services Component, as well as excluding food and energy, the PPI rose 0.3% m/m. But this high print followed a 0.0% m/m print in July and has been volatile in recent months.
b. The components that feed into the PCE Deflator look soft to benign.
c. Tomorrow's August CPI report is more important to the Fed and the markets.
1. August Retail Sales fell both in Total (-0.3% m/m) and Ex Auto (-0.1% m/m) and followed downward revisions to both June and July.
a. Consensus for August Retail Sales was -0.1% and +0.2%, respectively.
2. August Industrial Production fell 0.4% m/m, weaker than the -0.3% consensus.
a. Importantly, Manufacturing Output also fell 0.4% m/m -- despite a rebound in motor vehicle assemblies -- and followed downward revised gains in June and July. Fed hawks had cited the June-July gains when they upped their rhetoric a few weeks ago.
3. While the Phil Fed Mfg Index jumped to +12.8 in September from +2 in August, the bulk of the details weakened.
a. An average of the components that map into the Mfg ISM fell in September.
b. Note that the overall Phil Fed Index reflects answers to a question about overall business conditions. The details are more company specific, as they regard orders, production, inventories, employment, etc. Companies should be more knowledgeable about the latter than the former.
4. The Claims data suggest the worst of the soft patch may be over. Both Initial and Continuing barely moved up in the latest week, suggesting that the hurricane-related bad weather in parts of the country did not significantly depress them in the prior week. Both are slightly below their respective August average.
5. The August PPI showed no inflation in the headline prints -- 0.0% m/m Total and +0.1% m/m Core. Consensus was 0.1% m/m for both.
a. Excluding the dubious Trade Services Component, as well as excluding food and energy, the PPI rose 0.3% m/m. But this high print followed a 0.0% m/m print in July and has been volatile in recent months.
b. The components that feed into the PCE Deflator look soft to benign.
c. Tomorrow's August CPI report is more important to the Fed and the markets.
Monday, September 12, 2016
Brainard Comes Through; When Should the Fed Tighten?
Fed Governor Brainard came through with dovish comments, citing a variety of reasons for monetary policy not to tighten. In particular, she cited the likelihood of continuing low inflation, evidence of increased capacity as the Unemployment Rate has been steady despite strong Payroll gains this year, and downside risks from abroad. She continues to provide the best analysis of the US economic situation among all the Fed officials.
Fed hawks (like Williams, Fischer and apparently Dudley) cited the strength of June-July economic data to raise the potential for a September rate hike. But, this analysis was dubious, as the June-July strength risked being just a temporary catch-up from the weak May. They should have known this, and, indeed, that is what occurred as the August data softened. Low growth may persist, as the NY Fed nowcast model projects a slowdown in Real GDP Growth to 1.7% in Q416 from a projected 2.8% in Q316. Moreover, the latter risks being revised down as data come in.
In an environment of slow economic growth and low inflation, when would it be appropriate for the Fed to tighten? My view is that there would be a natural window for the Fed to tighten when there is a substitute force to spur the economy. And, this force is likely to be fiscal stimulus. If the new Administration -- whether Clinton or Trump -- implements a large enough program of fiscal stimulus -- either tax cuts, government spending increases, or regulatory reform -- that boosts the economy significantly, the Fed would have an opportunity to raise rates. This idea suggests that the earliest window for the Fed to tighten may be mid- to late-2017.
Fed hawks (like Williams, Fischer and apparently Dudley) cited the strength of June-July economic data to raise the potential for a September rate hike. But, this analysis was dubious, as the June-July strength risked being just a temporary catch-up from the weak May. They should have known this, and, indeed, that is what occurred as the August data softened. Low growth may persist, as the NY Fed nowcast model projects a slowdown in Real GDP Growth to 1.7% in Q416 from a projected 2.8% in Q316. Moreover, the latter risks being revised down as data come in.
In an environment of slow economic growth and low inflation, when would it be appropriate for the Fed to tighten? My view is that there would be a natural window for the Fed to tighten when there is a substitute force to spur the economy. And, this force is likely to be fiscal stimulus. If the new Administration -- whether Clinton or Trump -- implements a large enough program of fiscal stimulus -- either tax cuts, government spending increases, or regulatory reform -- that boosts the economy significantly, the Fed would have an opportunity to raise rates. This idea suggests that the earliest window for the Fed to tighten may be mid- to late-2017.
Friday, September 9, 2016
Markets Vote No Confidence in the Appropriateness of a Fed Rate Hike -- What to Look for Next Week
The markets voted no confidence in the appropriateness of a Fed rate hike today -- stocks, Treasuries and oil prices fell sharply and the dollar rose. The stock market reaction, especially, signals that a rate hike would be viewed as harmful to the economy. The markets reacted to a speech by Boston Fed President Rosengren in which he said that in his opinion "a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy." The large market reactions to this standard Fed comment (in line with Yellen's Jackson Hole speech) show a pent-up sensitivity to the potential for a September rate hike. Several items scheduled next week may show whether this sensitivity was overdone today:
Monday:
1. Atlanta Fed President Lockhart speaks twice. His last speech on August 16 indicated that he thinks one rate hike this year would be appropriate. He is not likely to change this view, and a repeat may test whether the market is "sold out" on the potential for a hike.
2. Fed Governor Brainard speaks at 1.15pm (EDT), later than Lockhart. She has been a dove and a better indicator of upcoming Fed actions than have the hawks. If she continues to argue against a hike, the markets could reverse some of the latest sell-off. If she says that a reasonable case can be made for a hike, it would seem to be almost a done deal.
Thursday:
1. August Retail Sales risk printing weaker than expected, based on anecdotal evidence. In particular, the very hot weather in the country could have had a depressing effect on the early introduction of fall clothing. Consensus is 0.0% m/m Total and +0.2% Ex Auto. A weak report could push down the NY Fed and Atlanta Fed models' nowcast of Q3 Real GDP Growth. The latest nowcasts are 2.8-3.3% for Q316 Real GDP Growth (was 3.0-3.5% before today's release of July Wholesale Inventories). The NY Fed model projects 1.7% for Q416 Real GDP Growth.
2. The Claims data are for the Labor Day week, so the markets may ignore them. They strengthened a bit in yesterday's release, but stayed within their recent range. Moreover, they could have been held down by the bad weather in the Southeast that week -- and catch-up could boost them in this report.
3. The September Phil Fed Manufacturing Index could come in weaker than expected, after it ran counter to the Mfg ISM in August (it rose, while Mfg ISM fell). Consensus is for an unchanged 2.
4. August Manufacturing Output, part of Industrial Production, could unwind the +0.7% m/m jump in July, based on the drop in Mfg jobs and hours worked in August. The July jump was cited by Fed hawks as evidence supporting a rate hike.
Friday:
1. A soft August Core CPI, just like the +0.1% m/m July Core, would question the need to slow the economy -- and thus argue against a Fed rate hike.
Monday:
1. Atlanta Fed President Lockhart speaks twice. His last speech on August 16 indicated that he thinks one rate hike this year would be appropriate. He is not likely to change this view, and a repeat may test whether the market is "sold out" on the potential for a hike.
2. Fed Governor Brainard speaks at 1.15pm (EDT), later than Lockhart. She has been a dove and a better indicator of upcoming Fed actions than have the hawks. If she continues to argue against a hike, the markets could reverse some of the latest sell-off. If she says that a reasonable case can be made for a hike, it would seem to be almost a done deal.
Thursday:
1. August Retail Sales risk printing weaker than expected, based on anecdotal evidence. In particular, the very hot weather in the country could have had a depressing effect on the early introduction of fall clothing. Consensus is 0.0% m/m Total and +0.2% Ex Auto. A weak report could push down the NY Fed and Atlanta Fed models' nowcast of Q3 Real GDP Growth. The latest nowcasts are 2.8-3.3% for Q316 Real GDP Growth (was 3.0-3.5% before today's release of July Wholesale Inventories). The NY Fed model projects 1.7% for Q416 Real GDP Growth.
2. The Claims data are for the Labor Day week, so the markets may ignore them. They strengthened a bit in yesterday's release, but stayed within their recent range. Moreover, they could have been held down by the bad weather in the Southeast that week -- and catch-up could boost them in this report.
3. The September Phil Fed Manufacturing Index could come in weaker than expected, after it ran counter to the Mfg ISM in August (it rose, while Mfg ISM fell). Consensus is for an unchanged 2.
4. August Manufacturing Output, part of Industrial Production, could unwind the +0.7% m/m jump in July, based on the drop in Mfg jobs and hours worked in August. The July jump was cited by Fed hawks as evidence supporting a rate hike.
Friday:
1. A soft August Core CPI, just like the +0.1% m/m July Core, would question the need to slow the economy -- and thus argue against a Fed rate hike.
Friday, September 2, 2016
August Employment Report Should Stop the Fed in September
The August Employment Report should stop the Fed from hiking at its September FOMC Meeting. The Report joins yesterday's Mfg ISM in showing that the economic strength seen in June and July -- and cited by the Fed hawks for their desire to hike in September -- was temporary. (I believe the June-July strength was just a catch-up after the weak May.)
The Report suggests modest economic growth. And, I would not be surprised if the Atlanta and NY Fed models eventually lower their nowcasts of Q3 Real GDP Growth (currently 3.2% and 2.8%, respectively). But, the combination of modest growth, low inflation, and steady Fed policy should be positives for stocks and Treasuries.
Note that my August Payroll estimate of +150k was almost dead-on. It ranked 2 out of 150 estimates on Estimize.com.
Here are the salient points of the report:
1. The 151k m/m increase in Nonfarm Payrolls is below the +186k m/m average from January through July.
2. The cyclical sectors -- manufacturing and construction -- posted job declines.
3. While the Unemployment Rate was steady at 4.9%, it rose to to 4.92% from 4.88% unrounded.
4. The broader measure of Unemployment -- U6 -- was steady at 9.7%.
5. Part-timers for Economic Reasons rose for the 2nd month in a row.
6. The Nonfarm Workweek fell to 34.3 Hours from a downward-revised 34.4 Hours in July (was 34.5 Hours), arguing against a pickup in production.
a. August Manufacturing Output is likely to unwind the July jump. Fed hawks had cited the July jump in arguing that economic growth was picking up.
7. Average Hourly Earnings rose 0.1% m/m, pushing down the y/y to 2.4% from an upward-revised 2.7% in July. The August y/y increase is the lowest since November 2015.
The Report suggests modest economic growth. And, I would not be surprised if the Atlanta and NY Fed models eventually lower their nowcasts of Q3 Real GDP Growth (currently 3.2% and 2.8%, respectively). But, the combination of modest growth, low inflation, and steady Fed policy should be positives for stocks and Treasuries.
Note that my August Payroll estimate of +150k was almost dead-on. It ranked 2 out of 150 estimates on Estimize.com.
Here are the salient points of the report:
1. The 151k m/m increase in Nonfarm Payrolls is below the +186k m/m average from January through July.
2. The cyclical sectors -- manufacturing and construction -- posted job declines.
3. While the Unemployment Rate was steady at 4.9%, it rose to to 4.92% from 4.88% unrounded.
4. The broader measure of Unemployment -- U6 -- was steady at 9.7%.
5. Part-timers for Economic Reasons rose for the 2nd month in a row.
6. The Nonfarm Workweek fell to 34.3 Hours from a downward-revised 34.4 Hours in July (was 34.5 Hours), arguing against a pickup in production.
a. August Manufacturing Output is likely to unwind the July jump. Fed hawks had cited the July jump in arguing that economic growth was picking up.
7. Average Hourly Earnings rose 0.1% m/m, pushing down the y/y to 2.4% from an upward-revised 2.7% in July. The August y/y increase is the lowest since November 2015.
Wednesday, August 31, 2016
August Payrolls/Average Hourly Earnings Risk Printing Below Expectations
Friday's August Employment Report may very well come in weaker than consensus expects, but it will probably not completely close the door on a September Fed rate hike -- as it is not clear whether they will be weaker than the possibly low bars set by the Fed. Nevertheless, weaker-than-expected prints for Payrolls and Average Hourly Earnings could boost stocks and bonds and weigh on the dollar. Here is some evidence that Payrolls and Average Hourly Earnings will come in weaker than expected.
Payrolls
1. Payrolls came in below the ADP Estimate in August in each of the past 3 years (since ADP changed its estimation procedures). The average shortfall is 48k, with a range of 24k to 70k.
August Print (000s)
ADP Estimate First-Print Private Payrolls
2016 177 na
2015 190 140
2014 204 134
2013 176 152
2. Some Street Economists point out that consensus has overestimated August Payrolls in each of the past 5 years. Consensus is +180k.
a. This pattern of consensus miss has tended to be an unreliable predictor, however.
3. The August Payroll Survey Week was relatively early this year, after a late July week. This early timing would seem to risk a downward bias to the m/m change in jobs.
a. But, BLS seasonal adjustment should account for this calendar timing, and there is no conclusive evidence that this early survey week will bias down an August Payroll gain.
Average Hourly Earnings
1. Average Hourly Earnings should print 0.0-0.1% m/m, as a result of a calendar quirk.
a. This quirk was likely responsible for the 0.3% m/m jump in July Average Hourly Earnings.
2. The y/y would fall to 2.3-2.4% from 2.6% in July. This would be the lowest y/y since November 2015.
3. Consensus for Average Hourly Earnings is +0.2% m/m.
Payrolls
1. Payrolls came in below the ADP Estimate in August in each of the past 3 years (since ADP changed its estimation procedures). The average shortfall is 48k, with a range of 24k to 70k.
August Print (000s)
ADP Estimate First-Print Private Payrolls
2016 177 na
2015 190 140
2014 204 134
2013 176 152
2. Some Street Economists point out that consensus has overestimated August Payrolls in each of the past 5 years. Consensus is +180k.
a. This pattern of consensus miss has tended to be an unreliable predictor, however.
3. The August Payroll Survey Week was relatively early this year, after a late July week. This early timing would seem to risk a downward bias to the m/m change in jobs.
a. But, BLS seasonal adjustment should account for this calendar timing, and there is no conclusive evidence that this early survey week will bias down an August Payroll gain.
Average Hourly Earnings
1. Average Hourly Earnings should print 0.0-0.1% m/m, as a result of a calendar quirk.
a. This quirk was likely responsible for the 0.3% m/m jump in July Average Hourly Earnings.
2. The y/y would fall to 2.3-2.4% from 2.6% in July. This would be the lowest y/y since November 2015.
3. Consensus for Average Hourly Earnings is +0.2% m/m.
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