As we are entering the third month of the quarter, there will only be a few important corporate earnings released this week, but investors will be busy assessing the overall labor market as we will get a few significant fundamentals related to productivity, cost of labor, and unemployment.
The economy is facing a challenge in terms of rising costs of labor while the productivity of non-farm workers is, in fact, going down. It’s easy to point fingers at the unusually strong labor market where businesses are finding it difficult to fill jobs with qualified people and they are desperately increasing pay to retain existing workers. However, unless corporate America can properly manage their workforce to improve productivity, the fierce competition in the job market will only lead to inflation and the Fed will have to step in to cool down the situation.
This week, we will get the productivity and costs report, which will help investors understand how things played out in the last few months. and on Friday, we will get the employment situation report, which will give us a clear picture about how fast average hourly earnings increased in February.
To sum up, it will be a data-driven week, so let’s hope the labor market hasn’t warmed up to a point where the Fed will need to respond with changes in the monetary policy even earlier than the market is anticipating.
Check out last week’s Market Glance here in which investors explored the compelling growth story of Salesforce.
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