Indeed, an employment increase near 150,000 would make the November figure look like an anomaly. A strong report would be one more sign that businesses are finally shedding their cautious outlook for the economy. It would also seem to bode well for consumer confidence and spending.
Beyond the topline figure on job growth are other important employment data to look for. In November, the average workweek for total private payrolls lengthened for the second straight month, to 33.9 hours. The factory workweek is the longest it has been in three years, at 40.8 hours. In addition, factory overtime has risen by 10% since June, to 4.4 hours. Longer workweeks are a good indication of increased business activity. If the average workweek continues to lengthen in December, it's another sign that additional hiring will be necessary in the near future.
TIME TO REPLENISH. The temporary-help services category is another key gauge on where the labor market is headed. Before businesses are ready to hire additional employees, they usually bring in temps to handle extra work. This category added 20,800 jobs in November and has grown by 166,000 positions since April.
Beyond the labor market, another point of interest is inventories. The burst of economic growth in the third-quarter was largely met by drawing down on goods already made and in warehouses. Indeed, the ratio of inventories to sales for U.S. businesses stood at a record low of 1.35 in October. With solid economic growth in the fourth quarter and positive expectations for 2004, companies will want replenish their inventories.
Both factory and wholesale inventories are expected to rise in November, and gains should continue into early 2004. While inventories make up a small part of gross domestic product, they could potentially be a big plus to growth in next couple of quarters.
Here's the week's economic calendar:
Monday, Jan. 5
Sales of domestic and imported cars and light trucks in December probably accelerated to an annual pace of 17.3 million vehicles, according the median forecast of economists surveyed by Informa Global Markets. In November, sales rebounded to a rate 16.7 million vehicles, from 15.5 million in September. The December increase would put fourth-quarter vehicle sales at a pace of 16.1 million, after hitting 17 million in the third quarter. However, most of the strength in the prior period came from a super August when light-vehicle sales hit an annualized rate of 18.9 million.
The pickup in vehicle sales over the final quarter was driven by more generous incentives. After toning down rebates and low financing offers at the start of the 2004 model year, both domestic and foreign manufacturers are sweetening offers. For domestic auto makers it's cheaper to keep producing vehicles and push them out the door by offering more incentives than to slow down production or close facilities. That's due in part to agreements between the Big Three auto makers and unions that limit how much companies can do as far as cost cutting and shuttering factories.
MEETING OF NOTE
Monday, Jan. 5, 12 p.m. EST
Federal Reserve Bank of Atlanta President Jack Guynn gives his outlook for the U.S. economy in 2004 to the Rotary Club of Atlanta in Atlanta.
Monday, Jan. 6, 10 a.m. EST
Outlays for new buildings are forecast to have increased by 0.6% in November, say economists surveyed by Informa Global Markets. October construction spending rose 0.9%. Residential construction should once again be a large source of growth. In October, private residential construction, which makes up just over half of all measured construction expenditures, rose 2.2%. Single-family home construction in October grew 17.7% from a year ago. That's the biggest yearly gain since early 1999.
However, the housing market appears to be at a peak. While the latest figures remain relatively strong, a gradual downward trend is likely setting in. New home sales eased for a third straight month in November, while existing home sales slipped for a second consecutive month.
At the same time, business and government construction may help pick up some of the slack. Expenditures on office construction rose for a third consecutive month in October -- the first such streak since mid-2000 -- and yearly government construction rose 6.6%.
ICSC-UBS STORE SALES
Tuesday, Jan. 6, 7:45 a.m. EST
This weekly tracking of retail sales, now assembled by the International Council of Shopping Centers and UBS bank, will update buying activity for the week ending Jan. 3. In the week ended Dec. 27, seasonally adjusted sales grew 2%, following a 0.6% increase for the week ended Dec. 20, and 2.1% for the period ended Dec. 13.
Large winter storms along the East Coast earlier in December appeared to increase the level of last-minute shopping. In addition, many retailers tried to hold off on deep discounting and major sales (see BW, 1/12/04, "This Holiday Season, Shoppers Blinked").
INSTINET REDBOOK RESEARCH STORE SALES
Tuesday, Jan. 6, 8:55 a.m. EST
This weekly measure of retail activity will report on sales for the fifth and final fiscal week of December, ending Jan. 3. Through the first four fiscal weeks, ended Dec. 27, sales were off by 1% compared to the same period in November. For the full fiscal month of November, sales were off 2.9% compared to October.
MANUFACTURERS' SHIPMENTS, INVENTORIES, AND ORDERS
Tuesday, Jan. 6, 10 a.m. EST
Factory orders probably fell 1.4% in November, due to the surprising 3.1% drop in November durable goods orders reported just before Christmas. That's based on the median forecast of economists surveyed by Informa Global Markets. In October, orders climbed 2.2%, after a 1.4% jump in September. Even with the forecasted decline, fourth-quarter factory orders are still on track to rise 2.3%.
There's also growing pressure to increase factory inventories, after holding steady in October and declining in each of the previous five months. The latest ISM factory activity report showed another drop in inventories but it also revealed that customer inventories remain too low. The recent pickup in demand has been largely satisfied by depleting inventories. The inventory-to-sales ratio for durable goods in November stood at an historically low level of 1.43.
ISM NONMANUFACTURING SURVEY
Tuesday, Jan. 6, 10 a.m. EST
The Institute for Supply Management releases its December index of business activity in the mostly services, nonmanufacturing sector. According to the median forecast of economists surveyed by Informa Global Markets, the December index moved back up to 61.8%, from 60.1% in November, but remained under the October and September readings of 64.7% and 63.3%, respectively. While the November figure showed a deceleration in business activity among nonmanufacturers, a reading near 60% still indicates strong overall business activity.
The new orders component eased, to 60.1% in November from 64.4% in October. The November employment component improved to 54.9%, from 52.9%. The November number the highest since March of 2000 and indicates a faster pace of hiring. The improved employment component is another positive for the December monthly employment report.
Wednesday, Jan. 7, 7 a.m. EST
The Mortgage Bankers Assn. releases its tally of mortgage applications for both home buying and refinancing for the week ending Jan. 2. During the period ended Dec. 26, the purchase index fell to 390.11, from 411.6 in the previous week, and 437.2 for the week ended Dec. 12. The latest reading of the four-week moving average through Dec. 26 retreated to 409.7, from 422.6 for the period ended Dec. 19.
The refi index dropped to 1644.3, from 1908.3 over the week ended Dec. 19 and 2072.9 during the week ended Dec. 12. The latest reading was the lowest since mid-2002 but remains strong historically. The refi index four-week moving average through Dec. 26 dipped to 1850.3, from 1964.2 in the prior week.
Mortgage activity now appears to be slowing even with attractive interest rates. The average rate on a conventional 30-year mortgage, according to HSH Associates, stayed below the 6% mark, at 5.95%, in the week ended Dec. 26. Low interest rates, however, should remain a positive force in the housing sector for the time being.
CHAIN STORE SALES
Thursday, Jan. 8
The International Council of Shopping Centers will release its December same-store sales figures for major U.S. chain retailers. In November, receipts increased 3.6% from a year ago, coming in just below expectations. In October sales grew 3.2%, following a 5.9% jump in September. The November results were a modest start to the holiday shopping season. The report showed a continuing trend of strong growth in the wholesale and drugstore groups and weakness among department stores.
MEETING OF NOTE
Wednesday, Jan. 7 Sunday, Jan. 11
The annual International Consumer Electronics Show is held in Las Vegas. Microsoft (MSFT
) Chairman Bill Gates opens the conference with a speech on Wednesday at 6:30 p.m. Other keynote speakers include Hewlett-Packard (HPQ
) Chairman Carly Fiorina, who speaks on Thursday at 4:30 p.m., and Sprint Corp. (FON
) Chairman Gary Forsee, scheduled to talk on Friday at 9 a.m.
Thursday, Jan. 8, 8:30 a.m. EST
First-time claims for jobless benefits for the week ended Jan. 3 most likely inched up to 345,000, say economists queried by Informa Global Markets. Jobless claims plunged to 339,000 for the week ended Dec. 27, from an upwardly revised 354,000 over the week ended Dec. 20. The most recent weekly tally was the lowest since January, 2001. The four-week moving average hit a new 52-week low of 355,800, from 361,800 for the week ended Dec. 20. During the week ended Dec. 20, continuing jobless rose to 3.32 million, from 3.23 million for the period ended Dec. 13.
WHOLESALE SALES AND INVENTORIES
Thursday, Jan. 8, 10 a.m. EST
Wholesale inventories in November probably grew 0.5% for a second straight month, based on the median forecast of economists surveyed by Informa Global Markets. Wholesale sales surged 2% in October and 1% in August. With sales growing faster than inventories, the October inventory-to-sales ratio fell to an historically low 1.18. The recent trend on the wholesale level supports expectations of a broad inventory rebuilding period in early 2004.
CONSUMER INSTALLMENT CREDIT
Thursday, Jan. 8, 3 p.m. EST
Consumer debt very likely climbed by $6.5 billion in November, according to the median forecast of economists surveyed by Informa Global Markets. Total credit outstanding increased a paltry $0.9 billion in October, following a sharp $17 billion jump during September. The scant increase in October was in all likelihood a function of reduced auto sales. Nonrevolving credit, which includes auto loans, fell by $1.3 billion in October. Revolving credit, made up largely of credit-card debt, posted a $2.2 billion increase in the same period.
MEETING OF NOTE
Thursday, Jan. 8, 1 p.m. EST
Federal Reserve Bank of Kansas City President Thomas Hoenig speaks about the economy and monetary policy at the Downtown Topeka Rotary Club in Topeka, Kan.
Friday, Jan. 9, 8:30 a.m. EST
Payrolls of nonfarm businesses in November are forecast to have risen by 150,000 and would mark a fourth straight increase. That's based on the median forecast of economists queried by Informa Global markets. The unemployment rate is expected to have held steady at 5.9%. Average hourly earnings very likely rose 0.2%, following a small rise of 0.1% in November.
Manufacturing payrolls are also being watched closely. In November factories cut 17,000 more positions. While manufacturers are still paring jobs, the pace is slowing. A smaller decline would be viewed as a positive, since factory payrolls have not shown an increase in this monthly report since July of 2000.
MEETING OF NOTE
Sunday, Jan. 11
U.S. President George W. Bush and Mexico's President Vicente Fox meet in Monterrey, Mexico, ahead of the Special Summit for the Americas. One of the expected topics of discussion during the visit is immigration reform. By James Mehring in New York