JOBS
Growth alters picture
Job seekers face a dilemma over how fast the economy can grow. With expansion running at less than a 4 percent rate, companies remain reluctant to add workers. Inflation fears are few, so the Federal Reserve has ratcheted rates up slowly.
All that would change if corporations stepped up hiring and the economy’s growth rate ramped up to, say, 5 percent. In that case, the Fed would boost rates more quickly. The goal: to quench any prospect of higher wages stoking price pressures.
Which brings us to Friday’s February employment report. Economist Tim O’Neill expects joblessness to hold steady at 5.2 percent, while payrolls grow by 225,000 to 250,000 positions.
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“There is a more solid feeling to the labor market, even though we aren’t expecting gangbusters job growth of the type we experienced during the peak of the boom in the late 1990s,” said O’Neill, of Chicago’s Harris Bank and its parent, Bank of Montreal.
AUTOS
Weathering the storm
The nation’s carmakers encountered heavy sledding in January, as blizzards shut down auto deliveries in parts of the Midwest and Northeast. The result was uncommonly weak sales.
A fresh look at the industry comes Tuesday and Wednesday, with car and light-truck sales for February. Chicago economist Diane Swonk is looking for a modest pickup, to an annual rate of 16.7 million units, from 16.1 million a month earlier.
“The Detroit-based automakers have been playing an uphill game for market share, in the face of tough competition from foreign nameplates,” said Swonk, of Mesirow Financial. General Motors Corp. has responded with deep discounting, she said, taking up to $5,500 off of the sticker on a light truck.
REAL ESTATE
Nowhere to go but down?
Fears that the real estate market is becoming a bubble and that prices will soon reverse have eased a bit, in part because mortgage rates are mostly steady. Last week’s report of January resales of existing homes did little to fan the pessimists’ concerns. Although sales slipped by 0.1 percent, to 6.8 million units annually, the resale market remains atop a plateau, at near-record levels.
Analysts expect Monday’s report of the month’s single-family new-home sales to show a similarly slight rise of 0.1 percent, to a rate of 1.11 million units annually.
“Activity in the market has peaked, but there are few signs of any impending downturn,” said Ian Shepherdson of High Frequency Economics, Valhalla, N.Y.
WALL STREET
Waiting for rate stability
A brightening outlook for corporate profits hasn’t been able to stir up much optimism in the stock market, where prices remain near where they stood in December.
Chicago investment manager Marshall Front, of Front Barnett Associates, says “investors are trying to come to grip with two interrelated factors, the price of oil and expectations of further inflation.”
So far, rates have been boosted six times, to a rate of 2.5 percent.
“At this point it appears the Fed will be able to stop its campaign of raising rates sometime this summer, at a level around 3 1/2 percent,” Front said. “That would give stocks room to move higher, perhaps by 10 percent for the year.”