EMPLOYMENT
Hiring picks back up
Instead of traveling the high road on cruise control, the economy has motored through the summer on a washboard side lane.
The manufacturing sector has hit several speed bumps, while consumer spending has slipped out of high gear.
Perhaps the greatest concern is the job market. In June, payrolls grew by a mere 112,000 positions, only about half the number economists were expecting. Joblessness held steady at 5.6 percent.
That brings us to Friday’s employment report for July. Economist Sung Won Sohn is looking for it to show a sizable advance, in excess of 200,000 positions.
“The consensus is that it will show a gain of 240,000, and it could even be a bit more,” said Sohn, of Wells Fargo & Co. in Minneapolis.
He said several seasonal factors held back hiring in June. Notably, very cool weather stunted buying for outdoor equipment, including bikes, pool supplies and barbecue cookers.
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Sohn sees the economy adding about 200,000 jobs a month between now and the end of the year, bringing down the rate of joblessness at least slightly.
On the downside, he sees real hourly earnings in a rut. “Hourly workers have seen their pay decline by about 1 percent in the last year, after inflation, and that is placing a lot of people under great pressure,” said Sohn.
VEHICLE SALES
GM hints at rebound
The auto industry suffered through a deep slump at the end of the spring. Some blamed part of the drop in June on record gas prices, which soared past $2 a gallon. Dealers were under pressure to boost incentives, which in many cases already exceeded $4,000 per vehicle.
Accordingly, analysts will carefully scrutinize Monday’s report of car and light truck sales for July.
General Motors Corp. offered a ray of hope last week by saying sales are on track to post their best showing of the year. The company said trucks and sport-utility vehicle sales are red hot.
Numbers from other automakers also are expected to give the industry a boost.
FEDERAL RESERVE
Sitting tight on rates
Only nine days remain before members of the Federal Reserve gather to discuss monetary policy, amid widespread expectations that policymakers will engineer another quarter-point rise in short-term interest rates, to 1.5 percent. Wall Street economists are saying the rate will top 2 percent by the end of this year.
Chicago banker Kenneth Skopec, however, believes it is doubtful the Fed policymakers will act on rates when they meet Aug. 10.
“Fed Chairman Alan Greenspan told members of Congress the slight slowdown in spending in June was just a blip on the screen, nothing serious. But I’m guessing that nothing will happen on rates,” said Skopec, of MB Financial Bank.
EQUITIES
Turning point near?
After five weeks on the downside, the stock market in recent days has managed to claw its way into positive territory. But some analysts said the technical damage has been severe and think it will take additional time before investors can declare the coast is clear.
Chicago investment manager Marshall Front says the market “either has seen a turning point, or one is very close.”
He said second-quarter profits for blue-chip companies were up 24 percent from a year earlier, better than the 20 percent figure that was widely expected.
“The economy grew at an above-trend 3.75 percent rate for the first half of this year,” said Front, of Front Barnett Associates. “All signs continue to point to a very good second half.”