Weekly Reports | Feb 04 2011
By Greg Peel
Tonight brings the critical US jobs report for January. Wall Street is optimistic given recent positive data, a strong (albeit spurious) ADP sector report and falling weekly jobless claims. Forecasts have 145,000 new jobs being added.
There are two problems, however. One is that heavy snow shut down a lot of industry across the US in January, which likely led to temporary lay-offs. The other is the simple reality that the rate of unemployment measures only those Americans actively seeking work and thus eligible for unemployment benefits. It does not count those who have thrown in the towel. It is estimated that some 17% of Americans are actually without work, not just 9% odd. And when economic conditions pick up, as they have been in the US recently, many towel-throwers decide it's time to come back on to the market and look for work again.
The result is that while new job numbers might look positive, the actual rate of unemployment may not budge or worse – it may even rise to reflect those returned soldiers. It is for that reasons many economists, and the Fed, foresee a US unemployment rate in the nines potentially right through to year-end.
Next week is a quiet one on the US data front, with consumer credit, wholesale trade and the monthly trade balance the highlights.
US bond yields have been on the rise on stronger economic data and corporate earnings, and next week the Treasury will auction US$72bn of three, ten and thirty-year bonds. It will be interesting to assess demand, particularly given the Fed is a concentrated buyer in the 2-10 range (QE2).
Next week in Australia sees the monthly ANZ job ads series and the Westpac consumer confidence measure. December retail sales are out on Monday (Gerry is nervous), the unemployment numbers are out on Thursday, and on Friday RBA governor Glenn Stevens addresses parliament.
China will report its trade balance on Thursday and on Friday its monthly round of inflation, sales and production data. The I-word is on everyone's lips in China at present.
As it is in the UK, where the economy seems strangely to be absolutely booming at the moment, albeit from a much reduced base. If there's one thing the Brits are used to coping with, it's austerity. They wouldn't have anything to whinge about otherwise.
The Bank of England makes its monthly rate decision on Thursday. With strong economic data rolling in and inflation pressures building, is it time to raise the cash rate from the long-held 0.5%?
For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.
