Abundance of Data Reinforces Outlook for Soft Landing in the US Economy

A surge of economic data is anticipated this week, potentially enhancing optimism for a “soft landing” in the US economy, as noted by analysts from Bank of America.

A key highlight on this week’s economic calendar will be the US nonfarm payrolls report, which could provide insights into the state of the labor market. In a client update, Bank of America analysts expressed their belief that the forthcoming figures may “add fuel” to the perception that the Federal Reserve is managing to curb inflation without triggering a significant downturn in employment or the overall economy.

Economists predict that the US economy will create 144,000 jobs in September, a modest increase from the previous month’s addition of 142,000. The unemployment rate is expected to remain steady at 4.2%, matching August’s figure. In August, job growth was revised down to 89,000, falling short of expectations for 164,000, while the unemployment rate decreased from 4.3%.

Overall, these numbers reflect a slowdown in labor demand, which several Federal Reserve officials have recently cited as a critical factor in their decision to implement a substantial 50-basis point interest rate cut earlier this month. This action came in response to previously raised rates, which were pushed to the highest level in more than twenty years in an effort to battle inflation.

Prior to the release of Friday’s nonfarm payrolls report, markets will have the opportunity to analyze job openings and private sector employment data. Investors will also closely examine the September readings of the Institute for Supply Management’s manufacturing and services purchasing managers’ indices for further indications of US economic activity.

Bank of America analysts expect the ISM surveys to reflect weakening in the manufacturing sector while indicating growth in the service sector. The ISM manufacturing PMI, set to be released on October 1, is projected to rise to 47.6 from August’s reading of 47.2, although it will still remain below the crucial 50-point threshold separating contraction from expansion. The non-manufacturing PMI, due out on October 3, is anticipated to edge up slightly to 51.6 from 51.5 in the previous month.

In summary, Bank of America analysts believe the data will support a positive outlook for a soft landing, stating that “economic momentum is cooling, not crumbling.”