Those who expect the Federal Reserve to soon relent on its tight-money policies point to a stutter-step in the bull market on Wall Street, as well as a noticeable loss of steam in manufacturing. Skeptics retort that such ripples won’t prompt the Fed to reduce interest rates anytime soon. They maintain that policymakers first will demand to see a much cooler labor market–including some lines at the unemployment office. All of which brings us to Friday’s October employment report. Chicago economist Robert Dederick is looking for joblessness to hold steady near a 30-year low, at 3.9 percent, with payrolls growing by 175,000 positions. “The trend in job growth is coming down, as the economy is slowing. A year ago, the trend for monthly payroll growth was more than 200,000 positions,” said Dederick, a consultant to Northern Trust Corp. But labor markets remain tight, he said, and “while the economy’s growth is no longer explosive, there is nothing to suggest that members of the Fed will do anything, for now.”
CONSUMER CONFIDENCE
SPENDING SLIPPAGE SLIGHT
With the holiday spending season at hand, Tuesday’s report on October consumer confidence and Thursday’s department and discount store sales figures loom large. Chicago economist Diane Swonk expects Tuesday’s report on consumer attitudes to show very slight slippage from September’s robust 141.9, because of gloom emanating from the Middle East. Overall, though, Swonk isn’t looking for Americans to scale down spending as the holidays approach. “The slowdown in housing is showing up with some softening in white goods,” she said. “Also, it is difficult to appeal with fashions to those over age 50, and some traditional retailers are being left out in the cold.” Swonk, of Bank One Corp., said end-of-year spending may shift in the direction of new cars and fancy vacations. But, she said, “last year’s holiday spending was extraordinarily strong, so the numbers may prove hard to beat.”
PERSONAL INCOME, SPENDING
DATA PAINT BIG PICTURE
A heavy schedule of economic reports includes September personal income and spending Monday, the month’s new home sales Tuesday, September construction spending Wednesday, along with the October survey from the National Association of Purchasing Management. September leading economic indicators are reported on Thursday, as well as third-quarter labor productivity and costs, and September factory orders on Friday.
EQUITIES
OCTOBER TRICKS NEARLY OVER
More Top Picks Leaf Blowers
As the final days of October drop from the calendar, the stock market is preparing to bid a not-so-fond farewell to the Halloween horror show that has beset Wall Street in recent weeks. But Chicago investment manager William Hummer believes the earnings-focused anxieties that have hit investors won’t vanish quickly. “Wall Street is starting to worry that next year could bring stagflation, in which costs increase, squeezing profits,” said Hummer, of Wayne Hummer & Co. “Costs for energy, employee compensation and interest payments are rising, but companies are afraid to raise prices.” Hummer’s bottom line: “The banner years for corporate earnings are coming to an end.”–William Sluis