Here’s hoping Labor Day is restful for you, because we rush right into heavy economic data after it's over.
The highlight of the upcomingweek will, of course, be Friday’s report on payroll jobs and the unemployment rate -- but likely of more interest will be the accompanying data on hourly earnings and hours worked. Last month, while hourly earnings increased measurably, hours worked declined, leading to a fall-off in retail spending and slow growth in total personal consumption spending.
Before we can fully appreciate upcoming data, we have to wade through the numbers of the week just ended. Those included one significant positive surprise: a surge in durable-goods orders. But that was followed quickly by a reminder of the economy’s struggles, with a report Friday that personal income fell in July, the first month-to-month decline in almost three years.
At the same time, personal consumption spending rose by a scant 0.2%, a weak monthly increase, matching the beginning of the fourth quarter of 2007, when the economy contracted.
Friday’s ominous spending report was not the only disappointing number in a week that saw home values continue to decline -- albeit at a slower rate than previous declines. But, the slow spending pace offered a glimpse into how much economic growth will ease in the third and perhaps fourth quarter.
While the unexpectedly large upward revision to second-quarter gross domestic product produced some quick euphoria, the fact that the increase came from an improved trade deficit -- flowing from a weaker dollar -- should have been a clue as to how unsustainable the above-trend growth rate is.
Consumer spending may also contribute less to growth in coming quarters, a possibility suggested not only by the spending report, but income indicators as well. Just as the employment report for July showed that average weekly earnings barely budged, the income-spending report for July showed total income growth has slowed. With tighter lending standards and still-declining home values, continued borrowing to bolster spending becomes less of an option, although consumer interest payments -- Federal Open Market Committee interest rate cuts notwithstanding -- are continuing to rise.
Both existing and new home sales improved in July, according to data reported in the week just ended, but each improvement required an asterisk. In the case of new homes, the data for June were revised sharply downward; in the case of existing home sales, prices fell, a movement which usually affects such sales. Indeed, some of the sales could have been of the same speculative variety that helped spawn the housing debacle.
The week’s data offered not only a first glimpse at third quarter GDP, but in a shorter time frame a basis for forecasting next Friday’s employment report, particularly the movement in payroll jobs.
The weekly report on continuing claims for unemployment insurance -- generally a surrogate for hiring -- showed that from mid-July through mid-August, continuing claims increased by 326,000, the largest month-over-month increase since April 1982, when payroll jobs dropped by 282,000.
The employment report will follow other important data elements, including the anecdotal Beige Book, as we head to the September 16 meeting of the Federal Open Market Committee. The Beige Book might be interesting to track, particularly as we look at the comments coming from districts of Fed presidents who are voting members of the FOMC: Cleveland, Dallas, Philadelphia and Minneapolis. In the last Beige Book, before the Aug. 5 meeting, only Philadelphia reported a weakening economy.
Monday, September 1Labor Day Holiday – No ReleasesGovernor Randall S. Kroszner speaks on The United States in the International Financial System: A Separate Reality? Resolving Two Puzzles in the International Accounts at Central Bank of Argentina 2008 Money and Banking Seminar., Buenos Aires, ArgentinaTuesday, September 2Construction Put in Place (July)June actual: DOWN 0.4%July consensus: DOWN 0.5%ISM Manufacturing Index (August)July actual: 50.0August consensus: 49.51Q actual: 6.35% (all delinquencies) UP from 5.82% (Q-Q)No 2Q consensusFederal Reserve Discount Rate Meeting MinutesWednesday, September 3MBA Application Index (Week ended: August 29)Week Ended August 22: 421.6, UP 0.5%Four-week moving average: 424.8, UP 0.05%No August 29 consensusChallenger Layoffs (August)July actual: 103,312 UP 26.4%No August consensusFactory Orders (July) [Includes Final Durable Goods Report]TotalJune actual: UP 1.7%July consensus: UP 0.1%Ex-transportationJune actual: UP 2.3%July consensus: UP 1.0%Motor Vehicle Sales (August)July actual: 12.55 million (DOWN 1.14 million, 8.3%)No August consensusBeige Book (September 16 FOMC Meeting)Thursday, September 4Monster Employment Index (August)July actual 157.0 DOWN 6.0No August consensusADP Employment Report (August) [BLS Private Sector]July actual: UP 9,000 [DOWN 76,000]No August consensusUnemployment Insurance Claims (Week Ended August 30)August 23 Actual: 425,000 DOWN 10,000August 30 Consensus: 435,000Four-week moving average: 440,250, DOWN 6,000No August 30 consensusProductivity and Costs (2Q - Revised)Preliminary actual: 2.2%Revised Consensus: 2.9%ISM Non-Manufacturing Index (August)July actual: 49.6No August consensus: 49.0San Francisco Fed President Janet Yellen speaks on U.S. Economy in Salt Lake City.Friday, September 5Employment Situation (August)Change in Payroll employmentJuly actual: DOWN 51,000August consensus: DOWN 75,000Unemployment RateJuly actual: 5.7%August consensus: 5.8%MBA Delinquency Survey (2Q 2008) [Tentative Release Date]Average Weekly EarningsJuly actual: +0.3% (6¢)August consensus: +0.3% (5¢)Average Weekly HoursJuly actual: 33.6August consensus: 33.6San Francisco Fed President Janet Yellen speaks on U.S. Economy in Los Angeles.Mark Lieberman is the senior economist for the Fox Business Network. Prior to joining FOX, he served as first vice president and manager of economic analysis and research at Washington Mutual in New York. Before that, he served as senior vice president at Dime Savings Bank of New York (which was later acquired by Washington Mutual), where he specialized in credit and risk management. He is a member of the Executive Committee of the New York Association for Business Economics. He has a degree in Economics from the Wharton School of the University of Pennsylvania.
