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player ready...JOB MARKET
Not really rosy
When an economy sheds upwards of 1.5 million jobs, in what is officially dubbed a recession, a comeback involving 66,000 new positions would hardly seem to merit shouts of joy.
Yet February’s modest rebuilding of payrolls, despite a jobless rate of 5.5 percent, brought plenty of boisterous reactions from economists.
Quite a few declared the recession over. Others said it is high time the Federal Reserve reversed course, boosting short-term interest rates to ward off any possibility of inflation.
The clamor was unexpected, and set off alarms among a number of Fed policy-makers, who said, in effect, that the central bank won’t rush to judgment.
Don’t look for a repeat of the calls for monetary action after this week’s economic reports.
Chicago economist Robert Dederick is looking for Friday’s March employment report to show an advance in payrolls of 50,000 positions, but he sees joblessness rising to 5.6 percent.
“The basic story is that an economic recovery is in place. That issue is settled,” said Dederick, a consultant to Northern Trust Co.
“What remains to be seen, however, is how strong will the recovery be? So far, the rebound is stronger than expected, yet the rise in payrolls remains quite modest. Corporations remain very reluctant to add new workers.”
The good news, Dederick said, is that all signs point to the economy gaining momentum.
VEHICLE SALES
Keep on trucking
After nearly giving cars away after the Sept. 11 terrorist attacks, at least when it comes to the cost of financing, the nation’s automakers were expected to veer into the slow lane.
The most gloomy analysts said Detroit was weaving toward a dead end because the demand for cars would be exhausted.
Instead, the industry continues to zoom along. Don’t be surprised if Monday’s reports on March car and light truck sales show undiminished buyer enthusiasm.
Analysts at Banc of America Securities in New York are looking for an annual sales rate close to February’s 16.7 million units.
Thanks to “an improving economy and continued competitive pricing, early anecdotal reports support a similar sales pace in March, only 2 to 3 percent below last year’s strong sales rate,” they said. “Vehicle sales have held up far better than expected.”
MANUFACTURING
Fragile gains
The nation’s manufacturing sector seems to be back on track after more than 18 months of decline. But the rebound remains iffy, and in part it has depended on defense orders.
Expect Monday’s March survey results from the Institute for Supply Management, formerly known as the purchasing managers’ report, to show a slight downtick from the 54.7 percent reading a month earlier.
The February reading was the second advance in a row for the index, following a decline in 14 of the previous 15 months.
With businesses having sold off truckloads of inventory, some analysts are declaring the shelves nearly bare.
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However, not all industries are alike, and some still are on the canvas. The hardest hit: those that sell capital equipment to factories.
EQUITIES
Budding profits
No sooner will the spring holidays come to an end than the stock market will confront corporate earnings. First-quarter results will begin rolling out within 10 days, and they will be lackluster.
However, Chicago investment manager Marshall Front said the profit picture is brightening on a daily basis, and the rest of this year will offer a happier environment for shareholders.
“For the first quarter, there have been 140 negative surprises by corporations, compared to 243 at this time a year ago,” said Front, of Front Barnett Associates.
In contrast, there have been 61 positive surprises for the quarter, up from 43 a year earlier, he said.
“What this shows is that, as usual, analysts are behind the curve,” Front said.
“They finally are adjusting their forecasts to reality. But it took them quite a while to catch up with the true depths of last year’s profit declines, so it will take some time for them to catch up with this year’s profit improvements.”