Major Macroeconomic Events Review: Unemployment, Service Sector and Interest Rates

It’s time again for our traditional review of major macroeconomic events. On Friday, the unemployment rate in the United States came in at 3.7 percent, which was well above the expected 3.5 percent. At that rate, however, unemployment is still at its lowest point in about 50 years. In that respect, there does not seem to be a worrying situation yet. However, that could quickly change if the proverbial flame hits the pan in the financial system.

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Macro data next week

At first glance, there are few mega interesting macroeconomic data points on the calendar for next week. We get on Monday in both Europe and the United States a lot of information about the health of the service sector inside.

This is interesting, because both the United States and Europe largely depend on the services sector. If it weakens, it doesn’t bode well for the economy. So far, however, these sectors have managed to hold their own.

Christine Lagarde, President of the European Central Bank (ECB), will also speak on Monday, which may cause some volatility.

Then we get on Wednesday data on industrial production in Germany, which is seen as the engine of the Eurozone in terms of industry. Furthermore, the Federal Reserve in America publishes the increase in the consumer credit for the past month.

If consumers suddenly need to borrow heavily to make their daily payments, it may indicate that they are starting to feel the pressure of inflation. In combination with the high interest rates on that credit, this can be a dangerous development.

Thursday will be an interesting day this week as we get information about the US job market again. It must ultimately weaken much further in order to speak of a recession. The expectation is that the number unemployment claims arrives at 239,000 units this week.

Silence before the storm

All in all, it is not macro data with which we expect a lot of volatility. However, it may be the be the calm before the storm, which erupts with the Federal Reserve’s interest rate decision on June 14. We are less than two weeks away from the next US Federal Reserve interest rate meeting. For the time being, it appears that the Federal Reserve will finally announce the long-anticipated interest rate pause on June 14.

Over the past 14 months, the Fed has aggressively raised interest rates from around zero to the current range of 5.00 – 5.25 percent. That has hurt prices in the market quite a bit, so it’s a good thing we’re now heading towards the end of this campaign.

With inflation persisting, it remains to be seen when interest rates will fall again from the current high level. At the moment, it seems unlikely that the Federal Reserve will start doing so as early as 2023, unless we face a persistent recession.

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