The big macro news event on the calendar this week is the January employment report due Friday, which will help the Federal Reserve assess the economic outlook after its widely-expected decision to hold rates steady on January 29. Forecasters expect bad weather during January depressed payrolls and other economic activity during the month. Of course, the January data will not capture effects from the new administration’s efforts to remake the economy with tools including import tariffs, deportations, a freeze on trillions in government spending, government layoffs, deregulation, and promotion of domestic oil production. That means the Fed is obliged to guess at how these effects will play out, or to wait a bit and see.
This week will see the return of Fed officials to public speaking as the two-week blackout period has ended. Markets are watching for insight on how the Fed views the impact of Trump’s policies. For starters, San Francisco Fed President Mary Daly is expected to discuss “The Economy 2025: the Impacts of Tariffs, Tax Cuts and Trump” on Tuesday morning. Chicago Fed President Austan Goolsbee is scheduled to speak on the economy Wednesday afternoon.
Notable economic reports in the week ahead include the Institute for Supply Management’s January surveys of purchasing managers with the manufacturing report due on Monday and its services counterpart on Wednesday. Services is expected to show sustained expansion while the picture on the manufacturing side remains troubled. Observers are watching for signs of the recovery in manufacturing the ISM has been anticipating in the new year. On Tuesday, the JOLTS report is due, which is closely watched for signs of easing in labor market tightness.
The sleeper item to watch will be the Treasury refunding auction announcement due on Wednesday morning and how the bond market responds. The market has been showing signs of stress absorbing huge new Treasury supply given an already problematic US fiscal position. Rising uncertainty and turmoil in financial markets adds to the challenge of coping with new supply.
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