Vital Signs for the Week of Mar. 29


The March employment report holds the best chance since late 2000 of showing an increase in factory employment. According to economists surveyed by Informa Global Markets, overall payroll gains are expected to be modest, with a median forecast of 128,000 new jobs. Plus, for the first time in quite a while, economists are sticking their necks out by saying that they believe the March report will show an increase in factory payrolls. Indeed, the latest string of manufacturing data would appear to indicate that the recent upswing in demand for manufactured goods can't be matched with the current levels of employment for much longer.

Factory activity looks set to keep rising even after the Federal Reserve's February industrial production report showed a surprisingly stout 1% rise in manufacturing output. This week's data on factory orders are expected to show demand is still on the rise. The Mar. 24 durable goods report already indicated business demand is holding up. Orders for computers and electronic products, as well as machinery, were both up over 1%.

The latest series of business-activity indexes also show rates are still rising, if at a slightly more moderate pace. The March Institute for Supply Management (ISM) manufacturing report probably eased to 59%. However, that is still far above the long-term trend of around 52%. Plus, the February employment component stayed above 50% for a fourth consecutive month, rising to 56.3%, from 52.9%. Technically, a reading above 50% indicates that manufacturers are hiring.

However, the ISM says a reading above 48%, over time, is associated with a rise in the Labor Dept.'s employment figures for manufacturing. The Mar. report, due out on Thursday, will provide further insight into the likelihood factory payrolls will show their first gain since the summer of 2000.

Other regional factory-activity indexes, like the surveys from the Federal Reserve Banks of New York and Philadelphia, also show manufacturers are hiring. Even the February employment index from the National Association of Purchasing Management-Chicago's monthly survey came in at 54.8%, the highest level since April of 1998.

While past performance is no guarantee for the future, the previous employment report did provide some hope on the jobs front. Manufacturing payrolls shrank by 3,000 in February, the smallest monthly drop since 2000. Over the past seven months, factory job cuts have been getting smaller. In fact, over the past three months through February, more than half of manufacturers increased payrolls. A wider array of businesses in the industrial sector is now adding workers.

Surely, there are strong reasons to remain skeptical. One is that the increase in business investment is meant largely to keep productivity growth high in order to limit the need to hire additional workers. With interest rates so low, the cost of buying productivity enhancing capital equipment, such as technology, is less costly than hiring, training, and providing expensive benefits for new workers. Still, the latest data look promising when it comes to factory employment.

Here's the week's economic calendar.

Don't forget to turn your clocks ahead one hour on Sunday, Apr. 4.

MEETINGS OF NOTE

Monday, Mar. 29

U.S. President George W. Bush hosts Prime Ministers Fatos Nano of Albania, Simeon Saxe-Coburg Gotha of Bulgaria, Ivo Sanander of Croatia, Juhan Parts of Estonia, Indulis Emsis of Latvia, Algirdas Brazauskas of Lithuania, Branko Crvenkowski of Macedonia, Adrian Nastase of Romania, Mikulas Dzurinda of Slovakia, and Anton Rop of Slovenia at the White House. The foreign leaders are gathering for the NATO's meeting to discuss "The Role of an Enlarged NATO and The Future of the Trans-Atlantic Relationship." A news conference follows as 4 p.m.

12:00 p.m. EST

Assistant to the President for Economic Policy and Director of the National Economic Council Stephen Friedman speaks about "Perspectives on the U.S. Economy," at the Detroit Economic Club in Detroit.

12:30 p.m. EST

Federal Reserve Bank of San Francisco President Robert T. Parry gives opening remarks at a community reinvestment conference in Hollywood, California.

MEETINGS OF NOTE

Tuesday, Mar. 30

Federal Reserve Bank of St. Louis President William Poole speaks before a luncheon hosted by the Evansville Rotary Club and the University of Evansville in Evansville, Indiana.

9:30 a.m. EST

Federal Reserve Bank of Atlanta President Jack Guynn speaks about "Economic Outlook and Monetary Policy" at a breakfast forum at Millsaps College in Jackson, Mississippi.

ICSC-UBS STORE SALES

Tuesday, Mar. 30, 7:45 a.m. EST

This weekly tracking of retail sales, assembled by the International Council of Shopping Centers and UBS bank, will update buying activity for the week ending Mar. 27. In the week ended Mar. 20, seasonally adjusted sales improved by 0.2%, after a 0.5% increase over the week ended Mar. 13, and a 0.3% decline in the prior period.

INSTINET REDBOOK RESEARCH STORE SALES

Tuesday, Mar. 30, 8:55 a.m. EST

This weekly measure of retail activity will report on sales for the fourth fiscal week of Mar., ended Mar. 27. Through the first three weeks ended Mar. 20, store sales were down 0.2%. It was a slight improvement compared to the period covering the first two weeks, when sales were off 0.5% compared to the same period in February. For the entire fiscal month of February, sales were up by 1.2% compared to January.

CONSUMER CONFIDENCE INDEX

Tuesday, Mar. 30. 24, 10 a.m. EST

The Conference Board's index of consumer confidence for Mar. is expected to have retreated to 86, say economists queried by Informa Global Markets. In February, consumer confidence tumbled to 87.3, from 96.4 the month before. While the index has retreated, it is not far below the long term average of 96.9.

The recent weakness in confidence appeared across the board in the February survey. "Consumers remain disheartened with current economic conditions, and at the core of their disenchantment is the labor market," says Lynn Franco, Director of the Conference Board's Consumer Research Center. The percentage of the 5000 respondents reporting that business conditions were good fell, while the percentage saying they expect a greater number of jobs to become available in the next six months also fell.

MEETINGS OF NOTE

Wednesday, Mar. 31, 3:30 p.m. EST

International Monetary Fund First Deputy Managing Director Anne Krueger speaks about the economic challenge in Argentina at an American Enterprise Institute conference in Washington, D.C.

8:30 p.m. EST

Federal Reserve Board Governor Edward Gramlich speaks on "Budget and Trade Deficits: Linked, Worrisome in the Long Run, but not Twins" at the Los Angeles Chapter of the National Association for Business Economics in Los Angeles.

MORTGAGE APPLICATIONS

Wednesday, Mar. 31, 7 a.m. EST

The Mortgage Bankers Assn. releases its tally of mortgage applications for both home buying and refinancing for the week ending Mar. 26. In the week ended Mar. 19, the purchase index slipped to 448.9, from 452.4 over the week ended Mar. 12. The latest reading of the four-week moving average through Mar. 19 kept rising, to 438.1, from 431.8, over the previous week. The average rate on a conventional 30-year mortgage, according to HSH Associates, nudged up to 5.55% in the week ended Mar. 19, from 5.53% over the week ended Mar. 12.

The refi index increased for a sixth consecutive week. For the week ended Mar. 19, the refi index hit 4988.7, from 4983.7 during the previous week, and 3567.6 in the week ended Mar. 5. The refi index four-week moving average climbed to 4268.1, from 3861.4 over the previous week.

MANUFACTURERS' SHIPMENTS, INVENTORIES, AND ORDERS

Wednesday, Mar. 31, 10 a.m. EST

Factory orders most likely rose 1.1% in February, say economists surveyed by Informa Global Markets. In January, orders declined by 0.5%, after a 1.8% jump in December. The February forecast would put factory orders up 7.3% from the same period a year ago.

New orders in February for durable goods were already reported up 2.5%. That was due in large part to a 9.9% rebound in transportation equipment orders, following a 10.5% drop the month before. Less transportation, orders were actually off 0.3%. It appears the weak sector for the month of February was fabricated metals, which includes businesses that transform metal into intermediate or end products from cutlery to shipping containers. New orders for fabricated metal products fell 3.4% in February. Excluding this sector and the big jump in transportation equipment, orders were up 0.3%. On a month-to-month basis, individual categories can be quite volatile.

The unfilled orders probably picked up in February. Backlogged orders for durable goods increased by 0.6% in February, after slipping 0.1% in January. Excluding transportation, however, unfilled orders rose by 1.3%.

CHICAGO PURCHASING MANAGERS SURVEY

Wednesday, Mar. 31, 10 a.m. EST

The Chicago-area purchasing managers' February index of industrial activity in the Midwest probably moderated to 61.8%, according to the median forecast of economists surveyed by Informa Global Markets. In February, the Chicago index came in at 63.6%, from 65.9% in January. Based on the March forecast, the headline number would be above 60% for a fifth straight month, the longest it has held above 60% since the mid 90s.

The index components are showing some easing, but the levels are still quite positive. The production index slowed to 73%, compared to 76.5% in January, a 20-year high. And production should remain strong in the region, with the new orders component standing at 67.5% and the order backlog index at 54.4% in February. Some further easing would not be surprising, but readings in the high fifties would still correspond to a steady rise in the region's factory activity.

MEETING OF NOTE

Wednesday, Mar. 31, 3:30 p.m. EST

Federal Reserve Bank of Chicago President Michael Moskow discusses the Fed's role in the U.S. economy, before the Global Student Investment Strategy Symposium at the University of Dayton in Dayton, Ohio.

VEHICLE SALES

Thursday, Apr. 1

Sales of domestic and imported cars and light trucks in Mar. are forecast to have climbed to an annual pace of 16.7 million vehicles, according JP Morgan Chase. In February, sales moved up to 16.4 million, from an annualized rate of 16.1 million vehicles in January, and 17.7 million in December.

Using the Mar. estimate, first quarter sales would stand at an annualized rate of 16.4 million for the first quarter, off from the discount-laden 16.9 million pace from last quarter, but better than the 16 million-unit rate posted over the first quarter of 2003, and just below the first period sales in 2002. For all of 2003, sales stood at 16.6 million, following a total of 16.8 million for 2002.

JOBLESS CLAIMS

Thursday, Apr. 1, 8:30 a.m. EST

First-time claims for jobless benefits for the week ended Mar. 27 probably crept up to 342,500. That's according to economists queried by Informa Global Markets. Jobless claims remained low, at 339,000 over the week ended Mar. 20, after hitting 338,000, the lowest level since January of 2001, in the week ended Mar. 13. The four-week moving average dropped for the fourth straight period, to 341,500 for the week ended Mar. 20, from 344,500 in the previous week.

During the week ended Mar. 13, continuing jobless claims dropped to 3 million. In the week ended Mar. 6, the claims moved up to 3.05, from 3.01 million over the period ended Feb. 28.

CONSTRUCTION SPENDING

Thursday, Apr. 1, 10 a.m. EST

Outlays for new buildings are forecast to have slipped by 0.2% in February. That's the consensus of economists surveyed by Informa Global Markets. In January, construction spending slipped 0.3%, after a 0.6% jump in December. Private residential construction could come in fairly weak. Housing starts and completions were off in February, most likely related to winter weather.

But some signs of improvement are showing in the nonresidential sectors. Private construction outlays for warehouses were up 9.3% from a year ago in January, following a 12.1% gain in December, the biggest jump since mid 2001. Office construction in the financial sector, while moderating, remains pretty healthy at an annual pace of 13.6%. Outlays by manufacturers may finally be stabilizing after dramatic declines during the past two years. After posting a yearly 51.1% decline in September of 2002, the most recent data show spending is off just 1.7%.

ISM SURVEY

Thursday, Apr. 1, 10 a.m. EST

The March index of industrial activity from the Institute for Supply Management most likely moderated to 58.8%, according to the consensus forecast of economists queried by Informa Global Markets. In February, the index stood at 61.4%, after hitting 63.6% in January, from 63.4% in December. The expected February reading could still be associated with an improving factory sector.

The index components are also reflecting a moderation in the pace of factory activity. The new orders index slipped to 66.4%, from 71.1% in January. Even so, the percentage of respondents that reported further increases in orders rose to 49%, from 48% in January. Typically an index reading above 51% corresponds to increases in the Commerce Dept.'s factory orders data, according to the ISM. While not a component of the headline number, the index tracking unfilled orders rose to 62%, from 60.5% in January. That indicates the level of backlogged orders likely accelerated.

It's also worth noting that manufacturers reported a longer list of commodities and raw materials rising in price. In addition, the February survey showed that several steel products, as well as electronic components, were in short supply for a second straight month. Going forward it will be interesting to see if more items rise in price and whether manufacturers push those higher prices on to customers. Such a trend would show up in the Labor Dept.'s producer price index.

EMPLOYMENT REPORT

Friday, Apr. 2, 8:30 a.m. EST

Economists queried by Informa Global Investors are once again calling for a solid increase in job growth. The median forecast for nonfarm business payrolls is a gain of 128,000 for March. The unemployment rate is expected to hold at 5.6%.

Manufacturing payrolls will continue to garner much attention. Factories are expected to have added 8,000 positions, after trimming just 3,000 jobs in February, and a 13,000 drop over January. Job losses in the factory sector have been slowing down recently.

The average workweek is expected to inch up to 33.9 hours, from 33.8 in February, and 33.7 hours in January. Longer workweeks are one indicator of an improving labor market, because it typically means increasing business activity. That's increasingly likely when payrolls are already beginning to rise. The factory workweek also grew longer, to 41 hours, from 40.9 hours in January, and 40.6 hours in December. Hourly earnings are forecast to have increased by 0.2% for a second straight period. By James Mehring in New York


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