Employment Report on Friday a Key Fed Outlook Barometer

Split Ticket: ‘Democrats may very well be favored to retain their majority’ in Senate

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August 28, 2022 01:57 PM

Split Ticket: ‘Democrats may very well be favored to retain their majority’ in Senate

Washington Focus

The dog days of summer are here. Congress is out into September for their long summer recess (no longer dubbed August recess…). When lawmakers return, expect political issues to become even more heated, if you can believe that.

There’s a relatively new kid in town regarding election forecasts: Split Ticket. They are a group of political and election enthusiasts who first became interested in mapping and modeling elections through a community on Twitter called #ElectionTwitter. Here is a link to the group.

What Split Ticket currently says about Nov. 8 Senate races:

“In this election cycle, the broad consensus after Democratic defeats in November 2021 was that the Republicans were poised to cruise to majorities in both the Senate and the House, with the acceleration of educational polarization combining with an unfavorable national environment to begin a possible multi-cycle Republican majority. However, ever since the extremely unpopular Dobbs v. Jackson decision overturning the constitutional right to an abortion, Democrats have seen a marked shift in their political fortunes, with the generic ballot surging to a tie and with Senate polling and special election outcomes indicating a significantly more Democratic environment than previously thought possible.

“Consistent with this updated picture, Split Ticket is revising its November ratings to be more reflective of the current political climate, and it is our view that at the moment, Democrats may very well be favored to retain their majority in the chamber come January of 2023.”

A federal judge in Florida announced the court’s “preliminary intent to appoint a special master” to review the documents seized during the FBI’s raid of former President Donald Trump’s Mar-a-Lago estate. U.S. District Court Judge Aileen Cannon said in a Saturday order that she was providing “notice” of the decision to the parties involved, noting that the decision was made due to the “exceptional circumstances presented.” Last Monday, lawyers for the former president filed a motion requesting the appointment of a special master to assess the records, arguing that the raid of his Palm Beach, Fla., golf club and winter residence was a “shockingly aggressive move.”

There’s already a sensitive issue unfolding when lawmakers return. House Natural Resources Chairman Raúl M. Grijalva (D-Ariz.) will urge House leadership to keep the federal energy infrastructure permitting proposal pushed by Sen. Joe Manchin (D-W.Va.) out of the upcoming stopgap funding bill or other year-end legislation. In a letter circulating among House members for signatures, Grijalva said the permitting overhaul should be “kept out of a continuing resolution or any other must-pass legislation this year… These destructive provisions will allow polluting manufacturing and energy development projects to be rushed through before the families who are forced to live near them are even aware of the plans,” Grivjalva wrote in his letter, which was earlier reported by The Hill (link).

Background: Congress needs to clear stopgap funding legislation, otherwise known as a continuing resolution or CR, by midnight Sept. 30 or the federal government will partially shut down. A CR is needed because none of the dozen fiscal 2023 appropriations bills have yet become law.

The sensitive part? To garner Manchin’s vote for the climate, health care and tax law signed by President Joe Biden, Senate Majority Leader Chuck Schumer (D-N.Y.) agreed to put up for a vote a separate bill that would speed up the permitting process for infrastructure projects. Democratic leaders at the time said they intended to attach the measure to the CR, although that plan was panned by progressive Democrats as well as Republicans who opposed the deal since it paved the way for Senate passage of the budget reconciliation law. A summary (link) released by Manchin’s office said the permitting agreement requires the relevant federal agencies to approve the controversial Mountain Valley Pipeline. Completion of the natural gas pipeline that begins in West Virginia has been delayed by several legal challenges from environmental groups.

Appeals court rules against vaccine mandate for government contractors. A federal appeals court ruled Friday that the Biden administration’s vaccine mandate for U.S. government contractors is likely unlawful. In a 2-1 vote, the Atlanta-based 11th U.S. Circuit Court of Appeals agreed with several other lower courts that have held that President Biden lacked the authority to require that U.S. government contractors ensure their workers are fully vaccinated against Covid-19.

Two U.S. Navy warships have entered the Taiwan Strait in what is the first U.S. naval transit in the waterway since U.S./China tensions spiked this month over a visit to the island by House Speaker Nancy Pelosi (D-Calif.).

We have a new weekly section at the end called Key Links where you will find links to major topics. It will change as warranted.

Key Economic Reports for the Week

Investors will parse the monthly jobs report, due Friday, Sept. 2, for any sign that the tight labor market is easing. Economists on average are forecasting a gain of 270,000 jobs, and for the unemployment rate to remain at 3.5%.

Monday, Aug. 29

Federal Reserve Bank of Dallas releases its Texas Manufacturing Outlook Survey for August. Consensus estimate is for a negative 12.3 reading, about 10 points better than in July. Four of the five regional federal reserve bank surveys of business conditions have had at least one negative print in the past two months, portending a significant slowdown in the manufacturing sector. Earlier this month, the New York Fed’s Empire State Manufacturing Survey posted its second-largest-ever decline.

Tuesday, Aug. 30

Bureau of Labor Statistics (BLS) releases the Job Openings and Labor Turnover Survey (JOLTS). Economists forecast 10.3 million job openings on the last business day in July, almost 400,000 fewer than in June. Job openings remain elevated historically but are off their peak of 11.9 million from earlier this March.
S&P CoreLogic releases its Case-Shiller National Home Price Index for June. Home prices are expected to jump 19.5% year over year, after increasing 19.7% in May. New- and existing-home sales have plummeted this year, but home prices remain near record highs.
Conference Board releases its Consumer Confidence Index for August. The consensus call is for a 96.5 reading, about one point more than July’s 95.7 figure. The index has declined for three consecutive months.
Federal Reserve Bank of New York President John Williams participates in a moderated discussion before the WSJ Live Q&A event organized by the Wall Street Journal.
Federal Reserve Bank of Richmond President Thomas Barkin speaks in person on inflation and the economy before the Huntington Regional Chamber of Commerce, in Huntington, West Virginia.

Wednesday, Aug. 31

MBA Mortgage Applications
ADP releases its National Employment Report. Economists forecast that the economy added 250,000 nonfarm jobs in August. ADP has changed its methodology, complicating comparisons with recent months.
Institute for Supply Management releases its Chicago Business Barometer for August. Economists forecast a 51 reading, roughly one point less than in July. July’s 52.1 reading was the lowest for the index since August 2020.
Federal Reserve Bank of Cleveland President Loretta Mester will speak on the economic outlook and monetary policy before the Dayton Area Chamber of Commerce Government Affairs Breakfast Series.
Minneapolis Fed will host a discussion on patterns of saving and spending in old age with Mariacristina De Nardi, an economist, University of Minnesota professor and consultant to the regional bank.
Dallas Fed will introduce its new president, Lorie Logan, in a virtual event at 5 p.m. ET.

Thursday, Sept. 1

Jobless Claims
Census Bureau reports construction spending data for July. Total spending is seen rising 0.2% month over month to a seasonally adjusted annual rate of $1.77 trillion. Construction spending declined 1.1% in June, the first drop since last September.
Fed Balance Sheet
Money Supply
Federal Reserve Bank of Atlanta President Raphael Bostic is expected to make remarks and participate in a moderated conversation at Georgia Fintech Academy on the same day and is expected to make a presentation to an undergraduate finance class at Georgia Tech’s Scheller College of Business.

Friday, Sept. 2

BLS releases the jobs report for August. Expectations are for nonfarm payroll employment to increase by 270,000, after a gain of 528,000 in July, which was more than double forecasts. The unemployment rate is seen remaining unchanged at a near-record-low 3.5%.

Key USDA & international Ag & Energy Reports and Events

With Pro Farmer’s Crop Tour completed, traders will again focus on U.S. weather and crop developments as we head into the harvest cycle. Friday brings an updated FAO world food price index and grains supply and demand outlook.

Monday, Aug. 29

Ag reports and events:

Export Inspections
Crop Progress
Livestock and Meat Domestic Data
Egg Products
EU weekly grain, oilseed import and export data
StatsCanada publishes data on production of wheat, canola and barley