If the nation’s economy is entering a slowdown, as many experts proclaim, why isn’t the evidence showing up in the old pay envelope? With joblessness at a 30-year low, members of the Federal Reserve remain skeptical about any rapid loss of steam. Accordingly, the central bankers seem unlikely to quickly loosen their tight grasp on monetary policy. Watch for a new reading on the labor situation Friday with the November employment report. Economist Robert Dederick expects it to show joblessness notching up to 4.0 percent, from 3.9 percent in October, while payrolls grow by a modest 140,000 positions. “The Fed is getting what it wants, because demand for workers is not as explosive as it was,” said Dederick, a consultant to Northern Trust Corp. “The labor market is losing a bit of its froth, and the economy is slowing across a broad front. Manufacturing has flattened. The only question is whether the Fed will get more of a slowdown than it sought.”
BEIGE BOOK
LOOKING FOR RATE CLUES
If the economy is, indeed, in lower gear, it is critical that members of the Fed provide clear guidance Wednesday, with the release of their beige book report on conditions region by region. Specifically, central bankers are under pressure to indicate a so-called neutral bias at their Dec. 19 policy meeting, telling the world that they are less fearful about impending inflation. But Chicago investment manager William Hummer sees little chance the Fed will offer any soothing words in advance of the meeting. “Members of the Fed are being very hard-nosed,” said Hummer, of Wayne Hummer & Co. “They will talk in the beige book about tight labor markets, and about a broad decleration of economic activity, but nothing severe, sharp or alarming.” He added, “They will offer no hint of any change in their bias to continue focusing on inflation. Nor will they offer any clue of an impending rate decrease.” Hummer sees no sign that the Fed will ratchet down rates anytime before spring.
NEW HOME SALES
SLIGHTLY COOLER MARKET
A chill sweeping the nation’s manufacturers has thus far missed the construction sector, which is basking in summer sunshine. But watch for Monday’s report on October new home sales to show a slight drop. Following an unexpected 9.2 percent leap in September, to an annual rate of 946,000 units, analysts expect a drop on the order of 4 percent.
EQUITIES
HOPES FOR HOLIDAY RALLY
More Top Picks Yeedi M12 Pro Plus
The mood on Wall Street has been cryptlike, although some investors in the stock market are holding out hopes for a year-end rally. Others harbor a belief that the worst is over, and it’s time to buy. But investment manager Henry van der Eb says there is no telling when the market malaise will end. “The stock market’s value peaked in March at 177 percent of America’s gross domestic product, and by now it probably has fallen to around 150 percent,” said van der Eb, of the Gabelli Mathers Fund in Bannockburn. “But since 1926, the average is around 52.2 percent. At the peak in 1929, it was 81.4 percent, and in 1972 it was 78.1 percent. That was before the two worst bear markets in history.” Studying the numbers, he said, tells him there is still a long way to go on the downside.