Economists expect 57,000 nonfarm jobs will be added to U.S. payrolls in February, a sharp decline from the 130,000 added in January.
But forecasters have been repeatedly caught off guard by the headlines as the Bureau of Labor Statistics has made technical adjustments to its figures. The January figure was twice as high as economists expected.
“The question this month is whether [January] was a flash in the pan or a first sign of a real rebound in hiring,” economists at Investec said in a note looking ahead to February figures.
The figures released on Friday will be closely watched by the Federal Reserve in the run-up to its next interest rate decision on March 18. Stubborn inflation was one of the central bank’s main concerns for much of last year; Employment has become a concern lately.
Economists warn that despite the positive data, the weakness in hiring and vacancies in recent months will eventually manifest itself in overall employment, potentially strengthening the case for a rate cut. This seems unlikely this month; futures trading suggests a 94 percent probability of no change, with two cuts of 0.25 percentage points priced in by the end of this year.
Still, Pantheon Macroeconomics’ Oliver Allen said labor market weakness “leaves room for wage growth to remain below the economy’s breakeven pace, putting renewed upward pressure on unemployment.” Zehra Munir
Can China internationalize the renminbi without opening its capital account?
China’s interest in securing a greater international role for its currency has gained more attention due to President Donald Trump’s erratic policies that are eroding confidence in the US-led world order.
Beijing’s efforts have long run counter to the maxim that it is possible for a country to have two, but not three, of the following: independent monetary policy, managed exchange rates and free movement of capital.
China has chosen the first two, while the US has chosen the first and the third.
As long as China’s capital account remains closed, the renminbi’s appeal as a reserve currency will be limited. According to the IMF, it makes up barely 2 percent of official foreign exchange reserves worldwide.
But Adam Wolfe, emerging markets economist at Absolute Strategy Research, notes that China has had more success in promoting the renminbi in trade finance.
In late January, the ideological flagship of the Chinese Communist Party published comments from President Xi Jinping calling on the country to build a “powerful currency” that could “be widely used in international trade, investment and foreign exchange markets, and achieve the status of a reserve currency.” Xi first made these comments in a private speech to regional officials in 2024.
Wolfe said that since Xi’s speech, “Chinese banks have increased their cross-border lending in renminbi, most of which has been trade financing… In effect, they have lent renminbi to foreign companies to pay for imports from China.”
The country’s central bank took action on Friday to slow the renminbi’s recent rapid appreciation, which has threatened China’s export competitiveness.
The focus on trading, says Jason Pang, senior portfolio manager and Asia local rates and currencies leader at JPMorgan Asset Management, has led to “increased adoption of the renminbi without the need to open the capital account.”
Yet there are limits to the extent to which this can happen.
“As long as capital controls exist, the role of the renminbi is more of a regional trading currency than a global reserve currency,” said Zouhoure Bousbih, emerging markets strategist at Ostrum Asset Management. William Sandlund
Could inflation in the eurozone change the ECB from its ‘sweet spot’?
ECB President Christine Lagarde has repeatedly described inflation and interest rate policies in the eurozone as “in a good place.”
February’s eurozone inflation data will provide the final test of that mantra when they are released on Tuesday.
Economists polled by Reuters expect annual inflation to reach 1.7 percent, the same level as in January, below the central bank’s 2 percent target. They expect core inflation – which excludes volatile food and energy prices – to remain stable at 2.2 percent, the lowest level since 2021.
Services inflation – a measure of domestic price pressures – has proven more persistent, falling in January but still remaining above 3 percent, as has been the case for more than two years.
“If services disappoint again, it will challenge the ECB’s current narrative that they are in a good place,” said Tomasz Wieladek, chief economist at T Rowe Price. “The bar for cuts will certainly be lower if there is a disappointing service print.”
The ECB has kept its key interest rate at 2 percent for the past five meetings. Traders expect this to remain the case, factoring in only a one-third chance of a quarter-point cut by the end of this year, according to the levels implied by the swap markets. Rachel Rees
