Investors will be watching closely this week to Friday’s U.S. jobs report for April and pay attention to incoming economic data from the 2nd quarter to help gauge the strength of the economy as the health of the job market comes into greater focus while the prospect of an interest rate hike in 2015 and a strong U.S. dollar continue to weigh on investors’ minds.
Following last week’s disappointing 2015 first quarter GDP report that missed estimates and showed only 0.2 percent growth expansion, more economists are beginning to seriously question whether the U.S. economy is resilient enough to handle an interest rate hike at the Fed’s next meeting in June, especially after last month’s jobs report from March underperformed consensus estimates and showed that only 126,000 non-farm payroll jobs were added to the U.S. economy, the weakest increase since December 2013, and ending the monthly gain of over 200,000 jobs for 12 consecutive months.
Economists are expecting a stronger bounce back in jobs for the month of April.
Briefing.com forecasts 255,000 non-farm payroll jobs added in April, the first month of the 2nd quarter, while the unemployment rate is expected to hold steady at 5.5 percent.
More employment data for April will be released on Wednesday with the private payroll processor ADP.
Briefing.com is forecasting 225,000 ADP jobs for April, up from 189,000 in March. Initial jobless claims will be reported on Thursday.
Greece’s economy remains the most fragile in the European Union and carries the highest debt to GDP in the currency bloc which currently stands over 175 percent while having the unfortunate role of possessing the highest unemployment level of over 25 percent.
Greece has already received numerous debt extensions and are now the beneficiary of a new one that runs out at the end of June until Greece can successfully qualify for a final bailout package of €240 billion.
Greece’s international creditors are hoping that Athens will first approve a series of economic reforms that restructures Greece’s economy and reduces its high public sector spending levels with pensions and salaries.
Greece’s newly elected left leaning Syriza party has been slow to fully approve the type of reform measures that Greece’s international creditors are expecting the debt ridden country to adopt, especially concerning Greek pensions and salaries.
On Wednesday the European Central Bank (ECB) will convene and determine the amount of liquidity for Greece’s banks that are already on life support with the ECB and have experienced high levels of deposit outflows.
Athens is cash strapped and owes the IMF €200 million in interest on May 6th besides a much larger principal payment of €750 million due later next week on May 12th, one day after a scheduled Eurogroup meeting.
According to Greek newspaper Kathimerini, Athens would like to reach an agreement with their creditors before Wednesday because they want to trigger an emergency Eurogroup meeting before the ECB convenes on Wednesday April 6th when the European central bank could make a haircut to the collateral offered by Greek lenders in exchange for liquidity.
The current discount applied to the collateral from Greece’s banks is 23 percent but Kathimerini reports that the ECB is working on 3 scenarios: Haircuts of 44 percent, 65 percent, and 80 percent.
If the ECB selects to impose a more severe haircut, local Greek banks would struggle to come up with enough collateral to maintain the flow of liquidity from the ECB.
Athens would also like to raise the 15 billion limit on the value of Treasury bills that Greece can issue and increase the ceiling on the exposure that Greek banks can have to them.
U.S. Economic Data This Week
Factory Orders for March (1st quarter)
ISM Services (April)
ADP Employment Change
MBA Mortgage Index
Unit Labor Costs-Prelim
Initial/continuing jobless claims
Challenger Job Cuts
Natural Gas Inventories
Non-farm payroll jobs report for April
-Johnathan Schweitzer firstname.lastname@example.org