Markets & Finance

Vital Signs: Jobs, Housing, Spending Still Look Gloomy in 2009


On deck: construction spending, car sales, ISM nonmanufacturing index, pending home sales, consumer credit, employment report

The economy begins the new year firmly in the grip of recession, as the economic reports in the upcoming week will plainly show. The data over the next couple of weeks will allow economists to firm up their estimates of the decline in fourth-quarter GDP, to be reported on Jan. 30. Many analysts believe the economy contracted more than 4% in the quarter, and a few think the decline could exceed 5%. A drop in that range would be the largest since the 1981-82 recession.

The week's most important numbers will come from the job market, when the Labor Dept. releases its December employment report on Friday (Jan. 9). The surge in weekly claims for unemployment insurance does not bode well for payrolls. Claims have jumped well above 500,000 per week in recent weeks, to levels last seen in the early 1980s. That comparison somewhat exaggerates the recent rise, since the labor force is now some 45% greater than it was back then. Nevertheless, economists expect December payrolls to have dropped by about 475,000. That shrinkage would come on the heels of the 1.2 million jobs lost in only the three previous months and bring total losses since the recession began in December, 2007 to 2.4 million. Analysts also expect the unemployment rate to rise to 7% from 6.7% November.

In the coming weeks, data on economic activity from jobs to housing to consumer spending are sure to look dismal. However, a few glimmers of good news are likely to emerge from the credit markets, in response to the Federal Reserve's Dec. 16 pledge to do whatever it takes to restore market functioning and economic growth. Those measures so far include abandoning a 25-year strategy of targeting interest rates, cutting its target rate to essentially zero, and commiting to buy "large quantities" of mortgage-related and other securities. The markets will get a closer look at these extraordinary policy moves when the Fed releases the minutes of its Dec. 16 meeting on Tuesday.

Already, rates for mortgages and corporate borrowing have declined significantly and the falloff in corporate debt issuance appears to have bottomed out. In particular, rates on 30-year conventional mortgages have fallen to just above 5%, the lowest since Freddie Mac (FRE) began keeping records 37 years ago. Home demand will remain challenged by current adverse conditions, but rates at those historic levels will eventually help sales. Plus, refinancing activity has taken off like a rocket, increasing more than five-fold since mid-November.

Financial markets always turn up before the economy does, so if the current wisp of improvement in the markets continues, it would be a good sign that the economy could return to at least modest growth in the second half of the year. However, as the upcoming week's round of data on jobs, construction, car sales, and factory orders are likely to show, there will be a lot of gloomy economic reports between now and then.

Here's the weekly economic calendar, from Action Economics:

Top Economic Reports

Top Reports

Date

Time

For

Median Estimate

Last Period

Construction Spending

Monday, Jan. 5

10 a.m.

November

-1.2%

-1.2%

Domestic Auto Sales (Millions)

Monday, Jan. 5

afternoon

December

3.5

3.6

Domestic Light Truck Sales (Millions)

Monday, Jan. 5

afternoon

December

3.9

4.0

Factory Orders

Tuesday, Jan. 6

10 a.m.

December

-3.0%

-5.8%

ISM Index (Nonmanufacturing)

Tuesday, Jan. 6

10 a.m.

December

36.6

37.3

Consumer Credit ($Billions)

Thursday, Jan. 8

3 p.m.

November

$1.0

-$3.5

Nonfarm Payrolls (Thousands)

Friday, Jan. 9

8:30 a.m.

December

-480

-533

Manufacturing Payrolls (Thousands)

Friday, Jan. 9

8:30 a.m.

December

-94

-85

Unemployment Rate

Friday, Jan. 9

8:30 a.m.

December

7.0%

6.7%

Average Hourly Earnings

Friday, Jan. 9

8:30 a.m.

December

0.2%

0.4%

Average Weekly Hours Worked

Friday, Jan. 9

8:15 a.m.

December

33.5

33.5

Wholesale Trade Sales

Friday, Jan. 9

10 a.m.

November

-2.8%

-4.1%

Other Reports and Events

Reports/Events

Date

Time

For

EARNINGS: Supervalu (SVU)

Tuesday, Jan. 6

ICSC-UBS Store Sales

Tuesday, Jan. 6

7:45 a.m.

Dec. 28-Jan. 3

Johnson Redbook Weekly Store Sales

Tuesday, Jan. 6

8:55 a.m.

Dec. 28-Jan. 3

Pending Homes Sales Index

Tuesday, Jan. 6

10 a.m.

November

SPEECH: San Fran. Fed President Yellen

Tuesday, Jan. 6

1:15 p.m.

Federal Reserve FOMC Minutes

Tuesday, Jan. 6

2 p.m.

Dec. 15-16

EARNINGS: Bed Bath & Beyond (BBBY)

Wednesday, Jan. 7

EARNINGS: Constellation Brands (STZ)

Wednesday, Jan. 7

EARNINGS: Family Dollar Stores (FDO)

Wednesday, Jan. 7

EARNINGS: Monsanto (MON)

Wednesday, Jan. 7

Mortgage Applications

Wednesday, Jan. 7

7 a.m.

Dec. 28-Jan. 3

ADP Employment Survey

Wednesday, Jan. 7

8:30 a.m.

December

SPEECH: Kansas City Fed President Hoenig

Wednesday, Jan. 7

1 p.m.

Initial Unemployment Claims

Wednesday, Jan. 7

8:30 a.m.

Dec. 28-Jan. 3

EARNINGS: Apollo Group (APOL)

Thursday, Jan. 8

EARNINGS: KB Home (KBH)

Friday, Jan. 9

SPEECH: Richmond Fed President Lacker

Friday, Jan. 9

12:30 p.m.


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