EMPLOYMENT DATA
Hiring still on hold
For more than a month, Americans have been puzzling over reports that the economy hit a wall–or was it a speed bump?–in midsummer.
The exact extent of the slowdown remains unclear, yet there is distinct evidence that the malaise struck on several sides. It affected manufacturers, the service sector, consumer confidence, the stock market and all forms of hiring.
To the pessimists, the loss of momentum signaled a likelihood that a double-dip recession was at hand. But not everyone has been ready to join the gloomsayers.
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In the meantime, though, the job market remains largely on hold. Accordingly, analysts will eagerly await Friday’s August employment report. Chicago economist Robert Dederick looks for it to show joblessness rising to 6 percent, from 5.9 percent in July, and payrolls growing by a paltry 25,000 positions.
“We have seen strong numbers for orders at factories, but companies remain reluctant to make the commitment to hire more workers,” said Dederick, a consultant to Northern Trust Corp.
The economy, he said, “continues to putt-putt along, after hitting some potholes at midyear. We have yet to shift into high gear.”
Dederick said the current recovery, which has been described as jobless, is proceeding more meekly than the expansion a decade ago, which also was slow to ignite hiring.
“We could see unemployment climb a bit further in the months ahead,” he said. “This is a creeping, crawling expansion that for now refuses to pick up speed.”
PURCHASERS’ REPORT
Factory rebound
An indicator that the economy had the blahs during July came with the month’s purchasing managers’ survey from the Institute of Supply Management. Results showed a steep drop, to 50.5 from 56.2 in June.
Expect a modest rebound in Tuesday’s report for August. Chicago economist Carl Tannenbaum says the consensus reading of about 51 would offer further evidence of manufacturing’s solid rebound.
“Industrial production has been up for seven months in a row, and that is a very good sign,” said Tannenbaum, of LaSalle Bank. “The factory sector has made a better-than-reasonable recovery. Manufacturers have worked hard to restructure, and inventories have been rebuilt. But they still are reluctant to invest in physical and human capital.”
Tannenbaum said recent comments by members of the Federal Reserve indicate they are not expecting a double-dip recession; that suggests they will hold interest rates steady when they meet Sept. 24.
For now, Tannenbaum sees twin worries holding back confidence and the economy: the looming presence of Sept. 11 and all that the terrorist threat implies, and the ongoing revelations of corporate fraud. He believes the negative spell would be broken if Wall Street could mount a serious rally.
AUTO SALES
In the fast lane
Those who see activity headed toward the fast lane point to the auto industry, which is enjoying near record volumes, supercharged with high-octane incentives.
Get ready for this week’s reports of August car and light-truck sales to show a sizzling annual volume rate of about 18 million units, exceeding the huge number of vehicles sold a month earlier. The number should be up by 7 percent to 10 percent from last year.
EQUITIES
Post-summer lift
After going without a meaningful rally for the better part of two months, the stock market has enjoyed some late-summer sizzle, carrying prices of many equities higher by 15 percent or more. But recent days have seen a slight pullback.
Stocks often see a nice gain when traders come back to Wall Street after Labor Day. However, analysts are quick to point out that the weeks from now through Halloween are the spooky season for investors.
Meanwhile, stock, bond, commodity, futures and options markets, along with government offices and some businesses, will be closed Monday for Labor Day. The weekly auction of short-term government debt will take place Tuesday.
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