Weekly Economic Indicators: Focus on Jobs

The full announcement schedule for the week of January 30th  is as follows:

  • Monday:  Personal Income and Outlays
  • Tuesday:  Employment Cost Index, S&P Case-Shiller HPI, Chicago PMI and Consumer Confidence
  • Wednesday:  Motor Vehicles Sales, ADP Employment Report, ISM Mfg Index, and Construction Spending
  • Thursday:  Initial Jobless Claims, Productivity and Costs, and Fed Balance Sheet
  • Friday:  Non Farm Payroll, Factory Orders, ISM Non-Mfg Index

Click this link for the full economic calendar for the week:  http://www.bloomberg.com/markets/economic-calendar/

What to Watch:

This week I spoke with Doreen Mogavero of Mogavero, Lee & Co., who is a frequent commentator on Bloomberg Television and Fox Business News.  Mogavero is focusing on a few economic reports she believes will impact the overall market, including the initial jobless claims, non-farm payroll, the ADP employment report, consumer confidence, factory orders, construction spending, motor vehicle sales, and housing data from S&P Case-Shiller HPI. A complete list of economic indicators is included above.      

Overall Market View

Mogavero is very concerned with the light trading volume.   She says if we don’t see an increase the trading volume, people will be out of work.  She feels investors are redeeming their funds and staying on the sidelines, or using their monetized assets to pay household expenses.  (Although she did acknowledge that some hedge funds did not perform to expectations / benchmarks this past year.)  She also feels investors are generally nervous about the market because of the political situation in Washington, Europe, and the global economic environment, especially the employment situation in the US.  Mogavero points out that the market is supposed to be a predictor, but she is not seeing this.  She feels we could be in for another “lost decade”, similar to what Japan went through.  She went on to say what is being portrayed on TV is not what she is hearing from people.  Mogavero believes financial and tech stocks are overbought and are due for a correction soon.  Finally, she says derivatives have been driving equity prices, which is counter to historical trends. 

Housing Market including S&P Case-Shiller HPI

She continues to believe the housing market will be down, although sales could increase leading into the spring season.  Everybody wants a discount today, she feels the housing sales data has been skewed, as some of these sales are short sales, forced sales, and foreclosures.  She does not think the housing market is in good shape, and remains a far way from bottoming out.  She is concerned with the $3 trillion on the books of Fannie Mae and Freddie Mac, as this is the main reason why the housing market remains depressed.  She pointed out that foreign buyers are continuing to aggressively acquire properties in Florida and Manhattan.  America is “up for sale” and they are benefiting from the mortgage interest rate deductions.  Mogavero has deep concerns about the direction of the country and lessening influence the US has on the rest of the world.

Initial Jobless Claims, Non Farm Payroll, and ADP Employment Report

Mogavero expects jobless claims to be below the 400K mark for a while, but it could explode to the upside at any time.  She expects the employment numbers to fall below 200K (roughly 180K) and the unemployment rate to stay constant at 8.5%.   Mogavero pointed out that the temporary hiring from the Christmas season did impact the jobs data in a positive way in the past few weeks.  With regards to ADP data, it is usually so far off the actual numbers because ADP does not have as deep a pool of employment figures as the federal government has to work with. 

Consumer Confidence

In the beginning of the year people were feeling happy and exhilarated as the euphoria from the Christmas season carried over.  However, as the weeks progressed, people started to realize the economy is still not in great shape.  She believes the next few weeks will be the pivotal moments for the rest of the year.  She noted that the Volatility Index (VIX) has been declining and people are much more complacent.   She generally feels that as January is a leading indicator for the rest of the year. 

Factory Orders, Consumer Spending, and Motor Vehicle Sales

Mogavero said she can’t imagine how things will get better in the economy based on the current state of manufacturing, as inventory on the books is very low overall, based on recent reports.  She expects consumer spending to be flat because people don’t have money to spend.  Motor vehicle sales, however,  are expected to go up because a  lot of people have older cars and they have to replace them.  She pointed out, people need to go to work and they have to drive.  Finally, she said the US economy used to be oil driven, saying that is how America got rich.  However, lately the housing market has dominated the economy and this sector has dragged the economy down with it.  She believes we have a very long period of deleveraging to go through.