Economics textbooks teach that there is a trade-off between inflation and unemployment: as inflation cools, it comes with a nasty unemployment chaser. So far this cycle, this hasn’t been the case. In many advanced economies inflation has plummeted, but unemployment has remained at historically low levels.
Although the relationship between the two indicators seems to have broken down, low unemployment figures are still enough to worry markets – and rate-setters too. Low unemployment increases confidence (and spending), while giving workers the bargaining power they need to demand higher wages. This can all fuel the inflationary fire.
But in the US, Federal Reserve chair Jerome Powell recently said that immigration and higher labour market participation had increased the productive potential of the US economy. If high demand is met with high supply, it could allow for more jobs and spending without higher inflationary pressure. It remains to be seen whether economies can have their cake and eat it too – Japanese, European and US labour market figures will all be released next week.
Monday 27 May
China: Leading Index
Tuesday 28 May
UK: BRC Shop Price Index, BRC Distributive Trades survey
US: FHFA HPI, consumer confidence, Dallas Fed Index
Wednesday 29 May
Euro area: M3 money supply
Japan: Consumer confidence
US: Richmond Fed Index
Thursday 30 May
Euro area: Business climate, confidence indicators (consumer, economic, industrial and services), unemployment rate
Japan: Trade balance
US: Initial claims, Q1 GDP revised estimate, wholesale inventories, pending home sales
Friday 31 May
China: Manufacturing, non-manufacturing and services PMIs
Euro area: Inflation, core inflation
Japan: Unemployment, industrial production, retail sales, housing starts
UK: Nationwide HPI, mortgage approvals, net consumer credit, M4 money supply
US: PCE deflator, core PCE deflator, personal consumption, personal income, Chicago PMI
