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Falling employment hurts but rising confidence may aid economic outlook
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The employment report is a lagging indicator of economic activity but it always gets plenty of attention from Wall Street and the Federal Reserve. And the upcoming release on Thursday will be no exception.
It is doubtful that the Fed will significantly close the monetary floodgates until employment has turned around.
Though we were reminded last month that nonfarm payrolls do not always correlate with weekly jobless claims, it is likely that we will get another dose of unsettling news from the nation's employers as a drop of 370,000 is forecast, according to Briefing.com.
Nonetheless, that's well below the peak of 741,000 in January. The unemployment rate, however, is expected to tick up to 9.6% from 9.4% (economic calendar).
Despite nagging uncertainties that still persist, consumer confidence has been improving and another small rise is forecast when the Conference Board releases the Consumer Confidence Index for June on Tuesday.
In May's survey, consumers had been growing less pessimistic about the employment outlook. Continued improvement in the public's view of the labor market and waning fears of layoffs are something I'll be looking for since it could pave the way for an upturn in spending.
The ISM Manufacturing Index out on Wednesday is expected to show that weakness in manufacturing continues to ease at a slow pace. Inventories have begun to decline amid sharp cutbacks in production, but it seems unlikely that producers will quickly re-open shuttered factories until stockpiles are well under control.
Finally, pending home sales on Wednesday will provide a sneak peek at existing homes sales a couple of months down the road. The index that looks at contracts signed but not yet closed jumped in April, but existing home sales are not yet moving ahead.
The National Association of Realtors noted the discrepancy and blamed the lack of major improvement in closings partly on conservative appraisals that have scuttled sales. But April's rise in pending home sales may also be a timing issue and may not be reflected until existing home sales for June are released. Stay tuned.
For another view of the economy: Please see my blog Tomorrow's Economy Today.
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