EMPLOYMENT
Adding to payrolls
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Those who try to explain a mysterious near-absence of payroll growth in an economy that is purported to be sizzling note these factors: Technology that has eliminated droves of workers, outsourcing of tasks overseas, and factories that are running at barely 75 percent of capacity.
That may not fully explain the lengthy drought in hiring, but analysts note that the current weakness in the labor market is nearly as severe as the jobless recovery in the early 1990s, which was followed by a boom in new positions.
Economist Lynn Reaser is expecting Friday’s January employment report to show payrolls beginning to grow, by a solid 175,000 positions. However, she expects a modest uptick in joblessness, to 5.8 percent from 5.7 percent in December, as people re-enter the labor force.
“Part of the story involves retail jobs, where stores hired fewer workers over the holidays,” said Reaser, of Banc of America Capital Markets in St. Louis. Because fewer workers were added, she said, “there were fewer layoffs during January.”
Overall, she expects the job market to improve for the rest of this year, with payrolls growing by 150,000 to 200,000 positions each of the next six months. That will bring joblessness down to 5.5 percent by year’s end.
“The story in the job market has been phenomenal expansion in productivity, as companies focused on cost-cutting,” Reaser said. “Employers are finally ready to place an emphasis on growth, and that will mean adding to payrolls.”
MANUFACTURING
A better measure
A modestly disappointing report Friday on gross domestic product, showing it advanced at a less-than-expected 4 percent rate in the fourth quarter, has economists wondering whether momentum is less than they thought.
An important indicator rolls out Monday, with the January purchasing managers’ survey from the Institute for Supply Management. It is seen as the most sensitive measure of activity in manufacturing.
On Friday, the Chicago equivalent of the report rose to a nearly 10-year high of 65.9 from 61.2, well above consensus.
Economist Ian Shepherdson said the report’s huge jump in production, which hit a 20-year high, points to a very strong ISM index reading Monday. Shepherdson, of High Frequency Economics, in Valhalla, N.Y., said “this is a welcome reminder that future indicators of growth point to 5 percent-plus.”
CAR SALES
Hitting the brakes?
Other reports due out include December personal income and spending Monday; the month’s construction spending, also Monday; January car and light-truck sales Tuesday; and January chain store sales Thursday.
Of the group, keep an eye on car sales. Detroit stormed out of the gates at the beginning of the year after volumes accelerated through the holidays. The question for dealers is whether buyers hit the brakes after a pronounced cold spell in much of the land.
EQUITIES
Shadowed by rates
A revival of interest rate worries has cast doubt on what will happen this year in the stock market, as Wall Street finished January without any big gains.
It is an adage among investors that the year’s first 31 days will set the tone for the remaining 11 months. Unfortunately, most stocks finished January with gains of 2 percent or less.
Chicago investment manager Marshall Front says part of the reason the market has slowed is that investors made their move early. “They were anticipating higher prices in January, so they invested in December,” said Front, of Front Barnett Associates.
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He added, “The rally in low-quality, high-risk stocks probably will peter out, but otherwise the market should move higher this year by about 10 or 15 percent.”