Could the Fed cut interest rates based on this week’s economic data?

The Federal Reserve will be watching jobs and unemployment numbers, as well as a manufacturing index and other private sector reports.

This is a pretty big week for economic data. We’re getting a lot of private sector reports, including the Consumer Confidence Index from The Conference Board and a manufacturing index from the Institute for Supply Management. And we’re also getting a bunch of reports from the federal government. The Labor Department will report the employment cost index, the number of job openings in March and the big one: the monthly jobs report for April.

Now with all of these data points coming in, the Federal Reserve’s Open Market Committee is all but certain to keep rates where they are when it meets this week.

Let’s get one type of data out of the way. When it comes to prices, we know exactly what the Fed is looking for.

“You know, very, very low rates of price increases,” said Jay Bryson, chief economist at Wells Fargo.

But keeping price increases low and steady is only half of the Federal Reserve’s dual mandate. The other half is maximizing employment. If the unemployment rate rises when the jobs report comes out this week, Bryson said that could actually be good news, because it could mean more people joined the labor force and started looking for jobs.

“That would help keep wage gains in check. And that’s also a very important, critical component of inflation,” Bryson said.

Previous jobs reports have shown that wage gains have been slowing down. Winnie Cisar, global head of strategy at CreditSights, said if wages stagnate, “that would begin to tell the Fed that there’s maybe a little more slack in the labor market than they are currently viewing.”

And maybe the Fed will start thinking it’s time to cut interest rates. On the other hand, Cisar said, wage gains could pick up again.

“And that would be yet another data point to kind of confirm that the Fed would probably stay a little more restrictive for longer than most people are expecting, at least at the beginning of the year,” Cisar said.

There’s also the Institute for Supply Management’s manufacturing index and other private sector reports out this week that will give us a sense of how the economy’s doing more generally.

Tim Duy, chief U.S. economist at SGH Macro Advisors, said the Fed will be watching for whether those come in stronger than expected.

“And if that’s the case, then they’re going to say, ‘Well, wait a second here, why should we cut rates any time soon?’” Duy said.

But since inflation has been pretty stubborn this year, Duy said the Fed just isn’t as concerned with those private sector data points, or even the labor market for that matter.

“It would have to take some big moves, big negative moves in the rest of the economy in order to divert the focus from the inflation mandate,” he said.

Duy said once the Fed feels confident enough that it’s tamed inflation, then it can focus on the job market.