Week Ahead: Bank Stress, Jobs, Home Sales, Service Sector
Market Watch (WSJ):
Another steep drop in payrolls expected in April
580,000 lost jobs would be the least bad in six months
Compared with what the economy has just seen, 580,000 lost jobs might look good. But in absolute terms, it'd be horrible. Aside from the current recession, it would be in percentage terms the eighth worst month for job losses in the past 50 years.
Meanwhile, according to economists surveyed by MarketWatch, the unemployment rate is expected to rise another half percentage point to a 26-year high of 9% with little end in sight...
The economy remains mired in a nasty recession, but the foundation is being laid for modest growth later this year, economists said. Large risks remain, including the flu pandemic, the fragile financial system and the continuing retooling of the global auto industry...
The good news is that inventories are being slashed quickly. The bad news is that they still remain too high relative to the weak demand from U.S. consumers and businesses and from foreign markets.
The consensus among economists is for gross domestic product to decline again in the current quarter, at about a 2% annualized pace, following the worst back-to-back losses for GDP in 50 years. Then, tepid growth in the second half probably won't be strong enough to keep the unemployment rate from rising further.
"The end of drags from housing, inventories, and a rising personal-saving rate along with fiscal stimulus should be enough to at least temporarily lift the economy out of the doldrums," said UBS's Harris. "However, their positive impacts on the level of economic activity are 'one-timers' for this year. Whether there will be a sustained recovery heading into 2010 will depend on jobs."
The economy typically contracts most violently just before it turns higher. The biggest employment losses also typically occur at the end of recessions, not the beginning. The past five months have seen payrolls decline by 3.3 million, or an average of 667,000 a month...
This recession has been particularly brutal on jobs. Through March, payrolls had fallen 3.7% from the peak, the worst job losses since the 1957-58 recession. The 1957-58 record of 4.4% would be smashed with April's expected loss and another 500,000 decline in May.
The unemployment rate has risen from 4.4% in 2007 to 8.5% in March; the 4.1-percentage-point increase is the largest in any recession since 1950. Most economists see the unemployment rate peaking at 10% or so next year...
The above story brings to mind this graph, courtesy of the Dallas Fed:
(It will be interesting to see what revisions may be in store for Feb & March)
Also up this week, on Monday everyone will get a fresh look at currently pending home sales and March construction spending, which brings to mind this graph, also courtesy of the Dallas Federal Reserve:
Bloomberg Survey ================================================================ Release Period Prior Median Indicator Date Value Forecast ================================================================ Construct Spending MOM% 5/4 March -0.9% -1.6% Pending Homes MOM% 5/4 March 2.1% 0.0% ISM NonManu Index 5/5 April 40.8 42.0 Initial Claims ,000’s 5/7 2-May 631 635 Cont. Claims ,000’s 5/7 25-Apr 6271 6350 Productivity QOQ% 5/7 4Q -0.4% 0.8% Labor Costs QOQ% 5/7 4Q P 5.7% 2.8% Cons. Credit $ Blns 5/7 March -7.5 -4.5 Nonfarm Payrolls ,000’s 5/8 April -663 -600 Unemploy Rate % 5/8 April 8.5% 8.9% Manu Payrolls ,000’s 5/8 April -161 -157 Hourly Earnings MOM% 5/8 April 0.2% 0.2% Hourly Earnings YOY% 5/8 April 3.4% 3.3% Avg Weekly Hours 5/8 April 33.2 33.2 Whlsale Inv. MOM% 5/8 March -1.5% -1.0%