Home > Economics Week Ahead > US Economics Week Ahead: Jobs & the Fed

US Economics Week Ahead: Jobs & the Fed

October 31st, 2009 Michael McDonough

With the first week of November comes a wave of important economic data—plus a few key earnings announcements—important macro releases include October’s employment report, an FOMC announcement, and several other indicators that will help gauge the health of the consumer and overall economy.  Also important to note is that the ECB, Bank of England, and Bank of Australia are all scheduled to make their own policy announcements next week, which could have some carry over into US markets.  On the earnings front, the market will be hearing from companies that include Cisco, Kraft Foods, Viacom, and Prudential.

Nevertheless, this week’s spotlight will be on Friday’s employment report, which is expected to show the unemployment rate moving from 9.8% to 9.9% with a decline in payrolls of -175K.  During the week it will be important for investors to watch the employment components of both the manufacturing and non-manufacturing ISM along with the ADP employment report for any clues towards Friday’s payroll numbers.  Any major swings in these indicators could shift expectations for Friday’s number and thus have a big impact on the day’s trading.

This Wednesday’s FOMC statement will undoubtedly receive immense scrutiny from investors looking for hints toward the timing of an eventual tightening cycle, however, as economic conditions have remained fairly static since the last meeting major changes are unlikely.  Other notable indicators include Monday’s motor vehicle sales and manufacturing ISM, Wednesday’s non-manufacturing ISM and Treasury refunding announcement, Thursday’s chain store sales and productivity, and Friday’s consumer credit report.

Here is the rest of this week’s US calendar:

Monday, Nov. 2

October’s Motor Vehicle Sales (Risk: Neutral, Market Reaction: Moderate): Car companies once again introduced strong incentives for the month to bring buyers back into the market after the expiration of the government’s ‘Cash for Clunkers’ program, but sales should remain relatively subdued.  The current Bloomberg consensus forecast is for domestic vehicle sales at an annualized pace of 7.3 million units compared to 6.7 million units in September.  August sales reached an annualized pace of 10 million units thanks to the ‘Cash for Clunkers’ program.

10:00 a.m. EST:  ISM Manufacturing Index (Risk: Neutral, Market Reaction: Significant): October’s ISM index should remain above 50 for the third consecutive month, despite likely remaining relatively unchanged from September’s release of 52.6.  The current Bloomberg consensus forecast is for a release of 53.0.  Investors will not only be paying close attention to the new orders index—previously 60.8—, but also the employment index—previously 46.2— for clues toward Friday’s employment report.  An ISM above 50 bodes well for the overall economy, and should place some upward momentum on industrial production.

10:00 a.m. EST:  September Construction Spending (Risk: Neutral, Market Reaction: Marginal): According to the Bloomberg consensus survey construction spending is expected to fall -0.2% in September versus an increment of 0.8%in August.  Strong housing start data will likely place some momentum on residential construction while high commercial vacancy rates and lower government spending should more than offset these gains through government and public construction spending.

10:00 a.m. EST:  September’s Pending Home Sales (Risk: Neutral, Market Reaction: Moderate): Pending home sales rose 6.4% in August.  However, pending home sales could start facing some pressure over the coming months as the first time home buyer tax credit is presently set to expire on November 30th.

10:30 a.m. EST:  Daniel Tarullo, Federal Reserve Governor, is participating on a panel to discuss executive compensation at a University of Maryland event.

10:00 p.m. EST:  US Treasury 4Q09 Borrowing Requirements (Risk: Neutral, Market Reaction: Marginal): The Treasury will release its borrowing estimates for the next two quarters.  Further details will be released in Wednesday’s refunding announcement.

Tuesday, Nov. 3

7:45 a.m. EST: ICSC-Goldman Store Sales (Risk: Neutral, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales.  Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure.  Last week’s number indicated a weekly increment of 0.1% in store sales compared to a gain of 0.2% a week prior.

8:55 a.m. EST: Redbook (Risk: Negative, Market Reaction: Marginal): The Redbook is a weekly measurement of chain stores, discounters, and department store sales.  This indicator tends to be less significant than the ICSC-Goldman Store Sales in forecasting retail sales.  According to the Redbook store sales were rose 0.7% last week on a year over year basis.

10:00 a.m. EST:  Factory Orders (Risk: Neutral, Market Reaction: Marginal): After falling -0.8% in August—on the back of weak durable goods—factory orders are expected to show at least a modest gain.  The current Bloomberg consensus forecast is for an increment in September of 1.0%.  The advanced durable goods orders report indicated a 1.0% increment in September, which should place some upward momentum on September’s factory orders.

Wednesday, Nov. 4

7:00 a.m. EST: MBA Purchase Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index.  Last week’s data declined 12.3% after falling 13.7% a week prior possibly due to the upcoming expiration of the first time home buyer tax credit.  The refinance index fell 16.2%, while the purchase index fell 5.2%.

7:30 a.m. EST:  Challenger Job-Cut Report (Risk: Neutral, Market Reaction: Marginal): This index measures the number of announced corporate mass layoffs, but does not take into account the timing of the actual layoffs.  Meaning layoffs announced in October may not actually take place until September, or even take place slowly over an extended period of time.

8:15 a.m. EST:  ADP Employment Report (Risk: Neutral, Market Reaction: Moderate): The ADP Employment report is considered a good window into Friday’s critical payroll number.  Any significant swings in this release combined with unexpected shifts in the manufacturing and non-manufacturing ISM employment indices could shift the consensus forecast for Friday’s employment release.

9:00 a.m. EST:  Treasury Refunding Announcement (Risk: Neutral, Market Reaction: Moderate): According to the Securities Industry and Financial Markets Association the Treasury will likely announce that it will issue $444.5 billion of marketable debt during the fourth quarter.  This would equate to a 13% jump from last quarter, but remain below the levels of fourth quarter 2008 as they were beginning to fund several new programs.  Treasury yields have the potential to creep higher over the coming months as additional supply hits the market.

10:00 a.m. EST:  October’s ISM Non-Manufacturing Index (Risk: Neutral, Market Reaction: Significant): Like the manufacturing ISM, non-manufacturing ISM, should remain above 50, but be relatively unchanged on a month over month basis.  The current Bloomberg consensus forecast is for a reading of 51.9, versus 50.9 in September.  Again, investors will be paying close attention to the employment index for clues towards Friday’s employment report.  Also, it is important to look for any continued improvements in the new orders index that would confirm a continued upward trend for the index.

10:30 a.m. EST: EIA Petroleum Status Report (Risk: Neutral, Market Reaction: Moderate): This report measures US domestic petroleum inventories.  Large unanticipated swings in this index could have a significant impact on energy prices.  Last week this report showed a rise of 0.8 million barrels versus an increment of 1.3 million barrels a week prior.

2:15 p.m. EST:  FOMC Announcement (Risk: Neutral, Market Reaction: Significant): Investors will be analyzing the FOMC statement very closely for any indication of when they intend to begin tightening monetary policy or how they intend to withdraw quantitative easing.  Nevertheless, it is unlikely that November’s statement will express any significant changes versus the prior month, as economic conditions have remained somewhat static.  However, you can be sure the statement will be analyzed under a microscope for even the slightest hint of a shift in policy.

Thursday, Nov. 5

October Chain Store Sales (Risk: Neutral, Market Reaction: Moderate): US chain store sales were up 0.1% on a yearly basis in September, and could experience some modest gains in October.  Relatively strong performance in the ICSC-Goldman Sachs weekly chain store sales index should bode well for retailers, but numerous headwinds still exist, including a weak labor market and wavering consumer confidence reducing spending.  

October’s Monster Employment Index (Risk: Neutral, Market Reaction: Marginal): This survey conducted by Monster Worldwide Inc. measures online job demand.  According to last month’s national survey, “Despite recent improvements in economic sentiment, U.S. employers continue to exhibit caution when it comes to hiring,” said Jesse Harriott, senior vice president and chief knowledge officer at Monster Worldwide.“On the upside, demand for workers is firming in the blue-collar segment, with welcome signs of revived activity in construction and manufacturing.”

8:30 a.m. EST: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims fell last week by 1K to 530K, after falling 11K a week prior. Despite second derivative improvements these numbers still indicate further deterioration to upcoming payroll numbers, and the unemployment rate, which is very likely to exceed 10% in the coming months. The current Bloomberg consensus forecast is expecting a pullback in this week’s initial claims data to 523K from 530K—these numbers are still very high.

8:30 a.m. EST: Third Quarter 2009 Productivity and Costs (Risk: Neutral, Market Reaction: Significant): Productivity gains continue to surprise to the upside as employers are able to gain more output from fewer employees.  Never before in history has productivity experienced such strong gains during a protracted economic downturn.  With that said the current Bloomberg consensus forecast is for third quarter productivity growth of 6.3%, compared to 6.6% during the second quarter.  A 6.3% rise in 3Q09 nonfarm business gross value add coupled with a what is a forecasted decline in nonfarm private sector hours worked helps support the case for strong productivity growth during the quarter.  Strong gains in productivity will likely cause employers to delay employers from hiring as they are now receiving more from less.

9:00 a.m. EST: RBC CASH index (Risk: Neutral, Market Reaction: Significant): The Royal Bank of Canada’s Consumer Attitudes and Spending by Household (CASH) Index is a monthly measure of consumer attitudes toward investing, the economic outlook, and personal finances.  This index does hold some importance in so much that it tends to demonstrate a pretty significant correlation with the consumer sentiment index being released next week.

10:30 a.m. EST: EIA Natural Gas Report (Risk: Neutral, Market Reaction: Moderate): This report highlights domestic natural gas inventories, which could have a significant impact on the energy sector.

4:30 p.m. EST: Fed Balance Sheet & Money Supply (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness.  The market will pay close attention to the reserve bank credit component, which measures factors supplying   providing reserves into the banking system.  The Fed’s balance sheet again declined last week to US$2.144trn from US$2.183trn a week prior.    The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to help moderate long-term interest rates.

Friday, Nov. 6

8:30 a.m. EST: Employment Situation Report (Risk: Neutral, Market Reaction: Very Significant): The current Bloomberg consensus forecast is for a decline in payrolls of -175, versus a decline of -263K in September, and an unemployment rate of 9.9% compared to 9.8% a month earlier.  October’s anticipated second derivative improvement in payrolls is partially due to expected improvements in September’s education components after strong losses last month. The unemployment rate will likely continue to rise—the consensus forecast range for October’s unemployment rate is 9.9% to 10.1%—and eventually peak above 10% next year.

10:00 a.m. EST: Wholesale Trade (Risk: Neutral, Market Reaction: Marginal): This indicator measure the level of inventories and sales by US wholesalers.  It is generally considered a good forward looking indicator toward trends in consumer behavior as stores typically ramp up inventories prior to any anticipated increment in sales.  It is important to note that this data is on a two month lag.

3:00 p.m. EST: September’s Consumer Credit Outstanding (Risk: Neutral, Market Reaction: Moderate): After falling $12.0 billion in August consumer credit outstanding likely declined again during September with declines in both revolving and non-revolving credit.  The current Bloomberg consensus forecast is for a decline of US$10.0 billion.  This would be the eighth consecutive month of declines for consumer credit outstanding.  It is important to note that the monthly changes in this index have been quite volatile recently making it harder to calculate accurate forecast. 

3:00 p.m. EST:  Elizabeth Duke, Federal Reserve Governor, delivers the keynote address at the Chicago Fed’s annual Community Bankers Symposium.

Enjoy the weekend!

Retweet
Comments are closed.