Monday, April 1, 2013

Preview of Economic Reports This Week ... Should See More Signs of Slow and Steady Improvement

This week's economic news will be highlighted by the nation's unemployment report on Friday.

Preceding the monthly unemployment report, several other important announcements concerning the economic health of our country will be issued during the week as well, beginning with business conditions as reported by the Institute on Supply Management (ISM) this morning.

The march in jobs continues, but how long? has the preview of the week's economic news:

"A pile of evidence suggests the U.S. economy hit the accelerator in early 2013 . . . . Economists polled by MarketWatch estimate the U.S. added nearly 200,000 jobs last month, reflecting the upturn in hiring that’s taken place since late last year.

The March employment report on Friday is this week’s economic special, but a pair of indexes that take measure of the manufacturing and service industries are on the main menu. Both of those indexes have also pointed to improved hiring trends in the private sector over the past few months.

Another 200,000 or so gain in hiring would lend further support to the idea that the economy is finally getting out of the quicksand and back onto solid ground after more than three years of muddy and uneven results.

Yet it will take a lot more positive data to cement the view that the start-and-stop recovery is about to enter a higher phase. The U.S. has generated a burst of job growth in each of the past two years, only to see hiring soften by midyear as key sectors of the economy faltered.

Higher taxes and gasoline prices, a still-soft global economy and divided government in Washington all pose threats to growth in the months ahead. U.S. lawmakers, for instance, are still at odds over tax, spending and debt policy. . . .

“What we don’t know is what’s going to happen as the effects of the sequester kick in and there is a hit to [worker] earnings,” said chief economist Richard Moody of Regions Financial. “And there’s still a lot of fiscal policy uncertainty — we seem drift from one crisis to another.”

Survey says!

The outlook on hiring will be partially colored in on Monday through a poll of manufacturing executives by the Institute for Supply Management. The ISM queries the executives who purchase supplies for their companies to find out how their firms are doing.

MarketWatch consensus
date report Consensus previous
April 1ISM54.254.2
April 1Construction spending1.0%-2.1%
April 2 Factory orders 2.9% -2.0%
April 2 Motor vehicle sales 15.3 mln 15.4 mln
April 3 ISM nonmanufacturing 55.8 56.0
April 4 Weekly jobless claims 350,000 357,000
April 5Nonfarm payrolls193,000236,000
April 5 Unemployment rate 7.7% 7.7%
April 5 Trade deficit -$45.0 bln -$44.4 bln

The ISM survey for March is forecast to hold steady near February’s level of 54.2%, a relatively healthy number that signals businesses continue to expand. The index has climbed three straight months after sinking to a three-year low.

“U.S. manufacturing appears to be improving once again, after faltering in the middle part of 2012,” noted economist Andrew Grantham at CIBC World Markets. . . .

The overall ISM services index, meanwhile, is projected to dip slightly to 55.8% in March from a relatively robust 56% in the prior month. The index is issued Wednesday.

The ISM lead-ins will give way on Friday to the March jobs report.

The MarketWatch poll of economists projects a 193,000 net gain and a 200,000-plus number if government is excluded. . . .

Hiring has accelerated sharply since last fall, averaging about 205,000 new jobs a month since November. The unemployment rate has drifted a bit lower to 7.7%, though no change is expected in March.

The same pattern of surging job growth occurred in 2012 and 2011, only to fizzle out. Yet a growing number of economists think this time is different.

For one thing, consumers have sharply reduced household debt, and by one measure it’s at the lowest level since at least 1980. A buoyant stock market and rising home prices are also adding to household net worth.

Perhaps more important is the wild card of housing. In each of the past two years, housing was a drag on the economy early in the year. That’s not the case in 2013. The industry is on the upswing after its worst slump in modern times.

“A resurgent housing market is the main difference between this year’s upturn in labor market conditions and the false starts of 2011 and 2012,” Grantham said."

Summing Up

So let's look forward to learning this week that the economic recovery is continuing and that jobs are growing, albeit too slowly.

That kind of news is much preferred to the negative spring surprises of the past two years.

As financial markets continue to rise, housing continues to improve and energy exploration, development and transportation are unleashed, we can expect more good things ahead.

Then if the government knows best gang actually gets something done about our future financial stability as a nation and takes some much needed bipartisan action to rein in entitlements and encourage private sector growth, we should be facing a long period of sustained economic growth. And we deserve it.

That's my hope and that's also my current take on things.

Thanks. Bob.

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