Key U.S. Economic Gauge Out Today; Steady Rates an 'Active Policy Action, ' SF Fed's Daly Says; India's Central Bank Stands Pat

Key U.S. Economic Gauge Out Today; Steady Rates an 'Active Policy Action,' SF Fed's Daly Says; India's Central Bank Stands Pat By James Christie

Good day. The September jobs report for the U.S. arrives today as a selloff in long-term bonds has pushed yields to 16-year highs, tightening financial conditions. That could threaten hopes for the economy to slow enough to cool inflation without triggering a recession. Yields on the 10-year Treasury note have shot higher in recent weeks as investors digest the prospect that a stronger economy will prompt the Federal Reserve to hold interest rates at current levels through next year. On Thursday, San Francisco Fed President Mary Daly said that, "Importantly, even if we hold rates where they are today, policy will grow increasingly restrictive as inflation and inflation expectations fall. So, holding rates steady is an active policy action." Elsewhere, the Reserve Bank of India this morning kept its policy rate unchanged, as expected, amid a moderation in inflation. RBI Gov. Shaktikanta Das said the central bank will remain focused on the withdrawal of accommodation.

Now on to today's news and analysis.

Top News Is the Economy Cooling or Revving Up? Jobs Report Will Offer Clues

Friday's jobs report is likely to show employers hired at a steady pace last month, the latest sign of a resilient U.S. economy that has contributed to the recent bond-market rout, according to analysts' forecasts.

Economists surveyed by The Wall Street Journal estimate employers added 170,000 jobs in September, down a little from 187,000 the prior month. That would round out a summer of slower job growth than in the first half of the year. Such an advance also would be in line with the average monthly pace of job growth in the three years before the pandemic. Some forecasters expect stronger job gains.

Fed Still Has to Run 'Final Mile' on Inflation, Mary Daly Says

The Federal Reserve's 2% inflation target is within sight but " not yet in our grasp , " San Francisco Fed President Mary Daly said Thursday. "We must remain resolute to finish the job."

Key Developments Around the World India Central Bank Holds Rate Steady as Inflation Moderates

Reserve Bank of India left its policy repo rate at 6.50% as domestic inflation eased, and maintained its annual inflation forecast of 5.4% for the fiscal year ending March 2024. The RBI has an inflation target range of 2% to 6%.

Japan Says Continued One-Way Yen Moves Can Be Seen as Excessive

Japan's Finance Minister Shunichi Suzuki said the government will consider various factors when judging whether the yen's moves are "excessive." If one-way movements continue, it could be seen as excessive, Suzuki said.

China Is Becoming a No-Go Zone for Executives

Beijing's tough treatment of foreign companies this year, and its use of exit bans targeting bankers and executives, has intensified concerns about business travel to mainland China. Some companies are canceling or postponing trips.

U.S. to Resume Deportations of Venezuelan Migrants

The U.S. will resume deportations of Venezuelan nationals who cross the border illegally, a rare diplomatic gesture that aims to deter the surge in migrants from the impoverished South American nation.

Iraq Asked for $1 Billion in Cash. This Time, Washington Said No.

Iraq is seeking a special shipment of $1 billion in cash from the New York Fed, but U.S. officials have withheld approval, saying the request runs counter to their efforts to rein in Baghdad's use of dollars and halt illicit cash flows to Iran .

Reports China Has Been Dumping Treasuries Have Been Exaggerated

Data purporting to show that China has been dumping its holdings of Treasury bonds have caught the attention of market bears and the financial press. But one economist believes these claims have been greatly exaggerated . And he's got the numbers to back this up. In a blog post published this week that caught the attention of some on Wall Street, Brad Setser, an economist and senior fellow at the Council for Foreign Relations, showed that a popular U.S. government data series on holdings of U.S. assets by foreign buyers doesn't tell the whole story. (MarketWatch)

Financial Regulation Roundup Can Someone Lose Track of Billions of Dollars?

Sam Bankman-Fried's bid to beat federal fraud charges could boil down to one question : Is it possible to lose track of $8 billion through an honest mistake? The FTX founder blames sloppy accounting. Prosecutors say he stole the money.

Blacklisted Chinese Chip Maker Does a Thriving Business With U.S.

China's largest semiconductor maker has been blacklisted by the Commerce Department and added to a Treasury Department list banning Americans from trading its shares. Still, its business with the U.S. is booming .

IRS Fight Against Pandemic Tax-Credit Scams Won't Be Simple or Fast

Tax lawyers say they expect several busy years defending tax-credit consulting firms and employers as the IRS tries to claw back some of the $230 billion it paid in employee-retention credits, or ERC refunds.

Forward Guidance Friday (all times ET)

8:30 a.m.: U.S. employment report for September; Canada labor force report for September

12 p.m.: Fed's Walker speaks at Brookings Institution's Making American's Payment System Work for a Digital Century

Monday

9 a.m.: Dallas Fed's Logan speaks at National Association for Business Economics Annual Meeting

10 a.m.: The Conference Board Employment Trends Index for September

Research U.S. Jobless Claims to Accelerate Next Quarter

Initial jobless claims in the U.S. "appear now to be creeping back up after their drop in September," Pantheon Macroeconomics chief economist Ian Shepherdson writes in a note about weekly claims data reported on Thursday. The data showed initial claims for unemployment benefits increased less than expected, to 207,000 from 205,000 the previous week. Shepherdson writes that "it is clear that the initial surge in layoffs late last year, concentrated in the tech sector, has flattened." But he adds that the impact of higher interest rates has yet to be fully felt through the economy, and predicts that "claims will be substantially higher by, say, the end of the first quarter, regardless of what happens over the next few weeks."

-Paulo Trevisani

Commentary Bond Selloff Might Force Fed to Rethink Shedding Assets

Long-term interest rates have shot much higher in not much time, and the tens of billions of dollars of Treasurys and mortgages the Federal Reserve is effectively pushing onto the market can't be helping, Justin Lahart writes.

Monetarism Is Back. It May Not Last.

Disciples of Milton Friedman are delighted: Monetarism seems to be working again. But an unprecedented fall in the money supply -the core variable at the heart of monetarism-is causing concern, James Mackintosh writes.

High Gas Prices Reek of Low Cigarette Sales

The OPEC oil cartel holds a lot of sway over what drivers in the U.S. pay at the pump, but factors closer to home are having a surprising impact: cigarette sales and convenience store wages, Jinjoo Lee writes.

Executive Insights

Here is our weekly roundup of stories from across WSJ Pro that we think you'll find useful. They are unlocked for WSJ subscribers.

CEOs and corporate boards are leading the charge on AI . At the WSJ CIO Network conference held in New York, CIOs and CTOs talked about the pressure to include AI in the digital transformation efforts that began during the pandemic years. Here are some highlights:

Walmart tech executive David Glick and Johnson & Johnson CIO Jim Swanson share business decisions that guide their deployment of AI. The CIOs of Goldman Sachs, Abbott and Rocket Cos. spoke on the lessons from early AI deployment . Generative AI startups have offered a bright spot for venture capitalists this year, say Kleiner Perkins partner Leigh Marie Braswell and Bain Capital Ventures partner Aaref Hilaly. Basis Points Applications in the U.S. for unemployment benefits last week edged up to 207,000, remaining near pandemic-era lows, from a revised 205,000 in the prior week, the government said. (MarketWatch) The U.S. trade deficit shrank by 10% in August to a nearly three-year low of $58.3 billion, reflecting a change in consumer spending habits and possibly some developing weakness in the economy. Imports dipped to $314.3 billion in August, and were almost 10% below their record high set a year and a half ago, while exports rose 1.6% to $256 billion, keeping them close to a record high. (MarketWatch) The median U.S. asking rent rose 0.4% year over year to $2,011 in September, Redfin says, the sixth straight month in which rents were little changed from a year earlier. (Dow Jones Newswires) Canada's official international reserves declined by $2.24 billion in September, driven by a net loss on investments, the federal finance department said. As of Sept. 30, reserves of foreign currencies and other monetary assets totaled $112.45 billion, down from $114.69 billion the month before. (DJN) New orders at German factories rose more than expected in August, albeit far from fully recovering after plummeting in July, indicating a still-fragile environment in the country's manufacturing sector. Manufacturing orders rose 3.9% on month in August, after diving 11.3% in the previous month, according to seasonally and calendar adjusted-data released by the German statistics office Destatis. (DJN) Feedback Loop

This newsletter is compiled by James Christie in San Francisco and Perry Cleveland-Peck in Barcelona.

Send us your tips, suggestions and feedback. Write to:

James Christie , Nell Henderson , Nick Timiraos , Tom Fairless , Megumi Fujikawa , Perry Cleveland-Peck [mailto:[e-mail]], Nihad Ahmed , Michael Maloney , Paul Kiernan

Follow us on X:

(MORE TO FOLLOW) Dow Jones Newswires

10-06-23 0715ET