ISM, jobs data in eye of the storm
Sandy likely hurt hiring, but maybe not auto sales and manufacturing
WASHINGTON (MarketWatch) — Some clues about what’s going on in the U.S. economy are starting to emerge after weeks of confusion sown by Hurricane Sandy. And it doesn’t look all that great.
http://www.marketwatch.com/story/ism-jobs-dat...2012-12-02
The superstorm severely distorted key economic indicators over the past month and it probably will do so again with this week’s headline report on job creation in November. Economist forecast a small net gain in new hiring: 75,000.
Yet buried within the recent array of economic reports is sufficient evidence to point to a slower pace of U.S. growth.
Investors will search for further hints in other reports this week on manufacturing orders, auto sales and consumer sentiment. At the very least, they hope to see a steady-as-she-goes trend in these numbers.
| date | report | Consensus | previous |
|---|---|---|---|
| Dec. 3 | ISM | 51.7 | 51.7 |
| Dec. 3 | Construction spending | 0.5% | 0.6% |
| Dec. 3 | Motor vehicle sales | 14.8 mln | 14.2 mln |
| Dec. 5 | ADP employment | 120,000 | 158,000 |
| Dec. 5 | Productivity | 2.8% | 1.9% |
| Dec. 5 | ISM nonmanufacturing | 53.0 | 54.2 |
| Dec. 5 | Factory orders | -0.1% | 4.8% |
| Dec. 6 | Weekly jobless claims | 378,000 | 393,000 |
| Dec. 7 | Nonfarm payrolls | 80,000 | 171,000 |
| Dec. 7 | Unemployment rate | 7.9% | 7.9% |
| Dec. 7 | UMich consumer sentiment | 82.0 | 82.7 |
| Dec. 7 | Consumer credit | $12.5 bln | $11.4 bln |
Upside surprises would be, well, a big surprise because of the lingering effects of Sandy.
“Trying to forecast these numbers is very difficult,” said economist Sam Bullard of Wells Fargo. “We are seeing Sandy’s effect across the board.”
Fourth-quarter freeze?
Looking beyond the hurricane, the fourth quarter of 2012 has clearly gotten off to a slow start. Consumer spending, by far the biggest source of economic growth, fell in October for the first time in five months. And orders for expensive, long-lasting goods were flat in October.
To be sure, Sandy disrupted economic life in the Northeast in late October and contributed to the decline in spending. Yet consumers appeared to be reluctant shoppers last month even when the effects of the storm are discounted, economists say. Read about decline in consumer spending.
Part of the reason: wages haven’t risen much and Americans don’t have a lot of savings tucked away.
Still, consumers have grown more confident over the past few months, according to several monthly surveys. And higher consumers eventually leads to more spending. Read more on consumer confidence.
What would really help is a burst in hiring. More jobs means more income and more spending.
The odds that hiring increased sharply in November are small. Economists surveyed by MarketWatch forecast that the U.S. added a scant 75,000 jobs last month, which would mark the lowest round of hiring since June. The unemployment rate is expected to be unchanged at 7.9%.
The employment report comes out Friday.
Once again, Sandy gets the blame. The storm caused a nearly 100,000 spike in weekly jobless claims, making it hard for economists to compile their forecasts. Claims figures are a critical ingredient in their calculations.
“That’s the tough part,” Bullard said.
Just look at wide-ranging predictions of economists surveyed by MarketWatch: Job estimates range from a low of 15,000 to a high of 159,000.
Chief economist Joshua Shapiro of MFR Inc. advisers investors to sift through the details of the employment report and pay attention to”any color” that government officials give about the effects of Sandy.
Another potential drag on hiring is the looming threat of the fiscal cliff — the combination of more than $500 billion in tax increases and spending cuts that will kick in after Jan. 1 unless Washington strikes a budget deal. Some companies have said they would put off hiring and investment until the standoff is resolved. See MarketWatch’s fiscal-cliff page
Earlier in the week, investors will pay close attention to Monday’s survey of manufacturing executives and to the monthly tally on U.S. auto sales.
The Institute for Supply Management’s manufacturing index is expected to hold steady at 51.7% in November. Any number above 50% means the sector is still expanding.
The new-orders component will get the most scrutiny. The index jumped to a healthy 54.2% in October and any significant backsliding would be viewed with alarm.
Auto sales, meanwhile, are expected to snap back in November after retreating in October. Economists forecast the monthly sales rate to climb to 14.8 million units from 14.2 million.
Auto sales have been one of the biggest bright spots in the economy over the past year. The failure of sales to rebound would be another kick in the teeth to fourth-quarter growth prospects.
