It’s a new month, as well as a new year, but perhaps it’s not a new economy, after all. In fact, more and more analysts are pinning their hopes for 2001 on the old economy, the one that makes everything from bobby pins to cars to houses to jetliners. The new economy, that bright hope of Y2K barely 12 months ago, has been tossed aside, along with its dot-bombs and shopworn promises that computers and the Internet would enrich everything and everyone. Unfortunately, that raises a serious question: Can the old economy generate jobs for all, especially if the high-tech sector continues to slow? Watch for partial answers Friday, with the employment report for December. Chicago economist Robert Dederick is looking for joblessness to have inched higher, to 4.1 percent, while payrolls grew by a tepid 75,000 positions. “The risks in the economy are definitely on the downside,” said Dederick, a consultant to Northern Trust Corp. “Expectations are being dashed, and members of the Federal Reserve are wondering whether they overdid it with higher interest rates.” While the job market has clearly slowed, he said, “it is not entirely clear how rapidly labor demand is eroding. But we can see that the demand for workers has lost some of its vitality.”
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CAR SALES
INCENTIVES FAIL TO DO TRICK
The auto industry is coming off the best year in its history, but don’t expect much glee Wednesday, when Detroit rolls out December car and light truck sales. Analysts expect a drop of about 10 percent, making the month the weakest in nearly two years. Despite generous incentives, carmakers are expecting a sales rate of about 15.3 million units for the month. That’s no disaster, but it is far below the 17 million unit rate that the industry was racking up for most of 2000. Other reports due out: the December index from the National Association of Purchasing Management Tuesday, November construction spending Wednesday, the month’s factory orders Thursday, and November new home sales Friday.
RETAIL SALES
WARY CONSUMERS PULL BACK
Gloom about holiday spending has been widespread, despite a last-minute spending surge. Fresh numbers appear Thursday, with December discount and department store sales. Analysts said the wild card is whether consumers are pulling back because of an ugly combination: a heavy burden of credit card debt coupled with astonishingly high utility bills blamed on soaring costs for heating fuel.
EQUITIES
A SLIPPERY SLOPE AHEAD
Stock, bond and commodity markets, along with banks, government offices, and futures and options trading, are closed Monday for New Year’s Day. The weekly auction of short-term Treasury debt is postponed until Tuesday. Meanwhile, longtime market observer Fred Gordon believes the stock market still has room to slip. “It could continue to edge a bit lower, but not alarmingly,” said Gordon, who for many years wrote a market letter in Northbrook. As for 2001, he sees the market advancing by 5 to 10 percent, closer to its historic average. “In short order, the Federal Reserve will act pre-emptively, lowering interest rates by a full percentage point,” he said. “Economic growth will slow, to a range of about 2 percent, but there will be no recession in 2001.”–