U.S. job growth expected to show a July rebound
[the bigger the hype the bigger the fall. I hope expectations get really hiked up - Mish]
Friday, July 30, 2004 7:30:31 PM
WASHINGTON (AFX) -- The U.S. economy hit a speed bump in June, when job growth slowed, retail sales declined and industrial output dipped
Most economists believe the June slowdown was a mere hiccup, while a smaller number of experts warn that the economy has downshifted to a slower pace of growth
Their respective positions will be put to the test on Friday, when the Labor Department reports on the nation's employment status for July. "Our sense is that the June payroll figures were an aberration in an otherwise solid 200,000 or so trend," said Lehman Bros. economists in their weekly research note, referring to growth in nonfarm payrolls
"Businesses are still cautious" because of the November election, terrorism, the stock market and rising inventories, said Irwin Kellner, chief economist for CBS MarketWatch and the Weller professor of economics at Hofstra University. "Even though consumers are confident, the fact is, they aren't spending
The jobs report will be among the first solid data for July. It is the highlight of a busy economic calendar. The tone of the report could help determine how financial markets perform, how fast the Federal Reserve decides to raise interest rates and perhaps even who will sit in the White House for the next four years
Job growth slowed during the second quarter after surging in the winter months. Nonfarm payroll growth peaked at an impressive 353,000 in March, and then dropped to 324,000 in April, 235,000 in May and just 112,000 in June
Economists are forecasting a return to stronger hiring in July. The average forecast of 23 economists surveyed is for payrolls to increase by about 230,000 in July, close to the average gain of 211,000 seen over the first six months of the year. The payroll forecasts range from Kellner's 150,000 to Goldman Sachs' 300,000
Meanwhile, the unemployment rate is expected to remain at 5.6 percent, where it's been for five of the past six months
"We expect a return to healthy payroll employment growth in July, for both technical and fundamental reasons," said Andrew Tilton, an economist for Goldman Sachs. Tilton argues that the fundamentals point to good growth. But technical factors in how the data are put together point to very strong growth -- of 300,000 or so. July payrolls are typically very strong in recoveries, especially when they follow on a decline in June, Tilton said. In addition, the June and July survey weeks were separated by five weeks instead of the typical four weeks. That extra week of growth could translate into a higher number come Friday, Tilton said. A matter of degree A more skeptical view comes from Charles Dumas, an economist for Lombard Street Research, who argues that businesses overhired in the second quarter, resulting negative productivity growth in the quarter. "Resumption of normal productivity growth should make June's 100,000-plus jobs growth typical for the second half of 2004," he said
Avery Shenfeld, economist for CIBC World Markets, is in step with the more widely held view. He's forecasting payroll gains of 233,000
"We share the general sentiment that June's aberrant weakness will be followed up by better numbers for July, particularly for the average workweek," Shenfeld said. The average workweek fell sharply in June to a record low 33.6 hours from 33.8 hours in May. The decline could have been partially due to the national day of mourning for former President Reagan on the Friday of the payroll survey week in June, in which case hours worked should rebound in July
Economists are forecasting a rebound in the workweek to 33.7 hours for July
Hourly wages were also extremely weak in June, rising just 0.1 percent. Adjusted for 3.2 percent inflation, weekly earnings for nonsupervisory workers representing about 80 percent of the work force dropped by 1.4 percent over the past year -- the steepest decline in eight years
The economists surveyed by CBS MarketWatch said average hourly earnings would likely rise 0.2 percent in July
Other data The Institute for Supply Management will release both of its indexes in the coming week. The ISM's manufacturing index is expected to rise to 61.2 percent from 61.1 percent. Any reading over 50 percent is good, and any reading over 60 percent is phenomenal. This index has been above 60 percent for eight straight months. It'll be released on Monday at 10 a.m. Eastern time
And the ISM nonmanufacturing index is expected to rise to 60.9 percent from 59.9 percent. It'll be released Wednesday at 10 a.m
Monthly auto sales also figure in the week's data. Due out Tuesday, July's sales are expected to rebound to a seasonally adjusted annual rate of 13.1 million from a six-year low of 12.1 million in June, as automakers revived discounts to speed the movement of vehicles off their lots. Also on tap, personal incomes are expected to show a rise 0.2 percent in June and consumer spending probably fell 0.1 percent. The monthly numbers will be released Tuesday at 8:30 a.m
The nation's factory orders are expected to rise 0.6 percent in June when the data are released on Wednesday at 10 a.m. |
