Jobs Report in Focus After Powell TestimonyJobsReportinFocusAfterPowellTestimony

The US jobs report on Friday is expected to show that employment grew at a slower pace in February, as the Federal Reserve searches for convincing signs that tighter financial conditions are putting a damper on inflation. While low unemployment and strong wage growth have underpinned hopes for a soft landing, they also threaten to push up inflation by stoking consumer demand. In his congressional testimony this week, Fed Chair Jay Powell said policymakers remained poised to cut rates this year but need to gain “greater confidence that inflation is moving sustainably” lower before moving ahead. Economists forecast that employers added 198,000 jobs last month, below the 353,000 jobs tallied in January. Payroll processor ADP’s data showed that private-sector jobs growth improved to 140,000 from 107,000, although estimates had suggested a stronger month with 150,000 new jobs. The first set of inflation numbers for February will arrive on Tuesday, and early forecasts were calling for the consumer price index to rise 0.4% month-to-month after January’s 0.3% gain.

Corporate earnings are also in focus. According to FactSet, 73% of the companies that comprise the S&P 500 have recorded higher fourth-quarter earnings than forecast, and profits are on track for a 4% increase year-over-year. This year, earnings growth could still turn out moderate if expectations are revised lower due to a slower economy. PGIM Quantitative Solutions’ Market Matters blog explains why corporate sentiment might offer some valuable clues as investors look ahead.