EMPLOYMENT
Feeble growth
While the experts crow about an economic revival, workers keep waiting for a rebound in the still-soft job market.
It’s true that payrolls have expanded in recent months, but the growth has been so skimpy that it hasn’t been able to prevent joblessness from rising. To that, economists say, just wait.
In their favor, Friday’s report on first-quarter gross domestic product showed the economy racing ahead at an annualized rate of 5.8 percent, indicating more good news may lie ahead.
But one of the sectors showing the most vigor, manufacturing, is notorious for a reluctance to create new positions even when orders pick up. And many companies in numerous sectors believe they have room for a bit more downsizing.
That brings us to Friday’s April employment report. Chicago economist Robert Dederick is looking for it to show joblessness rising to 5.8 percent from 5.7 percent a month earlier, and payrolls growing by a modest 50,000 positions.
“Expectations that the economy would recover with a rush have been tempered by recent data,” said Dederick, a consultant to Northern Trust Corp. “The recovery isn’t achieving a blistering pace, and we’re waiting for signs of meaningful momentum.”
While the growth of payrolls will be “on the sunny side,” according to Dederick, there are indications the job market remains more subdued than what economists were anticipating only a few weeks ago.
CONSUMER CONFIDENCE
Wavering mood
Americans’ stiff upper lip may be quivering ever so slightly, as recent indicators of their mood show some fissures in continuing optimism. Watch for a drop Tuesday in the Conference Board’s April survey of consumer confidence.
Chicago economist Peter Glassman is looking for a decline to around 102 from 110.2 in March.
“Americans already are starting to worry about inflation and rising interest rates, even though there is little likelihood that the Federal Reserve will tighten credit before late spring or early summer,” said Glassman, of Bank One Corp.
He said Americans often ignore statistical measures of their confidence as, month after month, they keep on spending. But the concern over inflation and interest rates is lurking in the background, Glassman said, and may slightly limit buying activity in the near term.
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VEHICLE SALES
On cruise control
For months, analysts have been predicting that activity at car dealerships would weaken after Detroit’s year-end binge of zero-percent financing. But somehow sales keep revving up.
Expect more of the same in this week’s reports of April car and light truck sales. Analysts at Bank of America Corp. in New York are calling for volume of 16.7 million units annually, about the same as in March.
“The sustained strength of auto sales has been one of the signs of U.S. economic resilience on display in recent quarters,” they said.
Also due out: March personal income and spending figures Monday and the April purchasing managers’ survey from the Institute for Supply Management Wednesday.
EQUITIES
Gun-shy investors
The stock market remains jumpy about the likelihood of economic recovery, and for good reason–too many companies in too many sectors remain mired in a malaise of subpar profits.
The worst malefactors are in the areas of telecommunications and technology, which have been sinking since the year 2000. Unless and until those companies show a meaningful rebound, investors will remain gun shy. Small wonder, when so many of them lost 50 percent to 90 percent of their money on gee-whiz technology stocks that were described as a sure thing.
On Friday, major-market gauges finished with the biggest weekly losses since the aftermath of the Sept. 11 attacks, as dreary forecasts rolled out from numerous corporate behemoths.
Among the most troubling was food giant General Mills, which said it is having trouble digesting its merger with Pillsbury. The cereal-maker cut its earnings outlook for the 2002 fourth quarter and 2003 fiscal year.
Investors are on watch: If such old-line consumer staple companies can’t make money in the current climate, who can?