U.S. Economic Highlights
30 Jan. 2012
Last week: The data on new orders this week suggested factories will remain busy this winter — filling those orders. The Conference Board’s newly revamped Leading Economic Indicators were also suggesting the economy will have at least a little kick in its step, perhaps by spring. The service sector is the key. Will there be enough demand to keep the service sector on a steady path or even allow it to turn it up a notch. That’s the big question right now. Yet it is interesting that only six months ago the question was more about the chances of the economy turning down a notch. A lot has obviously changed, for the better.
Monday, January 30
8:30am Personal Income and Outlays (Bureau of Economic Analysis)
Job but not income growth has picked up a little. That could translate to a more positive gain in Personal Income, perhaps a 0.2-to-0.3 percent rise in December. That could match or be a little stronger than outlays. While income growth might stay in this range, it could continue to rise a notch more than outlays could continue through the winter.
Tuesday, January 31
10:00am Consumer Confidence (The Conference Board)
Modest job growth but still disappointing income growth has left consumer confidence higher this autumn than this past summer, but still quite low by historical standards. Did any of this change in December?
Wednesday, February 1
4:00am Euro-zone PMI (Markit)
Purchasing managers generally are sanguine at best about near-term industrial prospects, and not much more optimistic about the service sector. The overall euro-zone economy is currently in recession. There is no reason to think supply manager sentiment will start recovering soon, moving back or above 50 — anything below that level is considered consistent with economic contraction.
10:00am Help-Wanted Advertising OnLine (The Conference Board)
The forward indicators of labor market activity have been pointing to choppy job growth. Was that still the signal in January?
10:00am U. S. PMI (Institute for Supply Management)
Purchasing managers on this of the Atlantic are a little more optimistic about near-term prospects, but concerned about a relatively weak ordering rate and low consumer confidence. Supply manager sentiment likely remained about 50 in January — anything above that level is considered consistent with economic expansion.
Vehicle Sales
The pace of vehicle buying has been better than anticipated so far in this model year (which essentially began in September). Some consumers simply decided it was time for new car, no more waiting. In some other cases, paying for repairs was less an option than making a change. Yet, job and income growth remain slow, sentiment very low, and auto dealers unwilling to go back to big incentive programs — though prices have edged a little lower. The sales pace could remain close to 13 million units (annualized) this winter. Indeed, production schedules appear to be in sync with this pace of demand.
Thursday, February 2
4:00am Euro-zone Producer Price Index (Eurostat)
Wholesale inflation was generally in a range of 0.1-to-0.3 percent through the end of 2011. Weak industrial conditions could put downward pressure on wholesale prices. But Both consumers and business executives across the zone are more concerned about growth, debt, and austerity than inflation.
Friday, February 3
4:00am Euro-zone Retail Sales (Eurostat)
Total sales fell by 0.8 percent in November, second straight monthly decline. It is very likely that December was the third straight month. January might very well be the fourth month as the recession in the euro-zone continues, under the weight of various austerity programs. Even France and Germany have experienced some drop in consumer demand. Job and income growth are slow. Confidence is weak. There is no reason to think any of this is beginning to change for the better. Indeed, there is a higher probability the recession could intensify.
8:30am Employment Situation (Bureau of Labor Statistics)
The pace of economic activity is strong enough to open up more as much as 150,000-to-175,000 jobs. December’s gain was better than that, possibly due to over-seasonal adjustment. Simply put the statistical assumption about holiday hiring was higher than expected. Now, some of those holiday temps have finished their assignments. So the statistical adjustment could produce a number lower than 150,000 for January. The underlying trend however is some strengthening in hiring. Manufacturing remains slow but isn’t losing momentum. Construction is still declining due to weakness in residential building, but the declines could be easing. The big key is in the “core” service sector (which excludes health and education). Job growth in key service sectors like finance and information procession or even in leisure and recreation has been slow — in no small part because consumers are still very about discretionary spending.
Regionally, the labor market remains consistently weak in the west. There are some signs of improvement in the Pacific Northwest. Elsewhere the Midwest is holding up, the South could show some spotty improvement. Nothing is changing in the Northeast corridor.
THE SITUATION ABROAD
Prospects for the global economy have been given a haircut, most recently by the IMF just this week. The industrial sector is fairing less well than the service sector in most regions, North America perhaps being an exception. This raises two important questions. First, can the service sector grow enough so the recession in the euro-zone doesn’t spread elsewhere. Second, will the momentum in the industrial sector in North America lend support elsewhere or will weakness elsewhere sap strength from the North American industrial economy. Which force will prevail will be a big story over the next few months, perhaps rivaling the ongoing saga over sovereign debt in the euro-zone.
FACT OF THE WEEK
4.8 million. In the 12 months ending in March 2011, 1.6 percent of the population or 4.8 million moved to a different state. That figure was up from 4.3 million over the prior 12-month period, reversing a falling trend that began in 2005. In fact, back in 2002, the number moving out of state was 7.6 million. Still, the fact the number of movers is recovering reflects some improvement in the labor market, and suggests improvement in the housing market is coming.
QUESTION OF THE WEEK
It’s getting more expensive to go to college. How can people afford it?
Actually, it has been getting more expensive for a very long time. And for a very long time undergraduate students have not only worked part time but the number of hours worked has been increasing. Survey data show that full-time undergrads (18 to 22 years of age or so called “traditional” college students) worked an average of 6 hours a week in 1970. That number nearly doubled to 11 hours a week by 2000. But, only half of these students worked. So, half of these students didn’t work while the other half were putting 22 hours a week in, and attending classes, and heading back to the dorm to finish term papers. The Great Recession changed all this and by 2009, the surveys show, the number of hours worked fell to only 8 hours, even though tuition costs were still rising faster than overall inflation, and job growth was minimal for graduates.
Going forward, the job market is improving, both for those undergraduates needed extra money to make tuition payments, and for graduates needing to pay off student loans. It is likely that the number of hours worked will be rising over the next few years. If only the same were true for grades.
