By Theresa Sheehan

PRINCETON (SMRA) – The steady feed of economic data in the
weekahead is capped by the January employment situation report on
Friday.

In the wake of the Federal Open Market Committee meeting of January
25-26, conditions in the labor market will be closely watched even more
in reference to the outlook for monetary policy that largely hinges on a
pickup in job growth.

The US Treasury announces the quarterly refunding package on
Wednesday.

Central bank announcements are expected from the Reserve Bank of
Australia and the European Central Bank. Fed policymakers are also
returning to public speaking following the end of the press blackout
period around the FOMC meeting.

The January employment report Friday morning overshadows the rest
of the data during the week. However, the days leading up to the release
are not devoid of interest. At the moment, expectations are for another
month of mild job increases by around 130,000.

This is close to the fourth quarter 2010 average of 128,000, and
would constitute a trend-like increase. A nice gain, but not enough to
draw down the large pool of un- and under-employed workers that is a
major factor behind the Fed’s current monetary policy.

The most closely monitored of the economic reports in advance of
the employment data is the ADP National Employment Report, which is
scheduled for 8:15 ET Wednesday. Last month the numbers pointed to an
outsized gain in payrolls that did not emerge. As a result, analysts
will be a little wary of the January data, but still take it into
consideration in last minute adjustments to expectations for nonfarm
payrolls.

The Challenger report on layoff intentions for January will
probably turn a bit higher than December as some of the cost-cutting in
payrolls that normally takes place in that month appears to have been
moved into January. We look for increases mainly in aerospace,
computers, and pharmaceuticals. There is also a fairly constant stream
of government workers at the state and municipal levels that has
characterized the report in recent months.

Initial jobless claims for the week-ended January 28 out Thursday
morning will probably unwind some of the 51,000 jump in the January 22
week that was weather-related. To be sure, another major storm hit the
Northeast late in the week, but that region is better prepared to handle
the impact than the Southern states that in large part accounted for the
previous week’s surge in claims.

Monday, we anticipate the release of the Fed’s Senior Loan Officer
Opinion Survey at 14:00 ET. The report is not officially on any release
calendar, but the Fed usually releases it the Monday following the FOMC
meetings in January, April, August, and late October/early November. It
should show that credit markets continue to normalize, competition for
lending is taking hold, and that while loan demand remains soft, it is
improving.

The ISM indexes of manufacturing and non-manufacturing are set for
release mid-morning on Tuesday and Thursday, respectively. On the
factory side, data so far for January from the regional Fed and NAPM
surveys suggests that activity has continued to expand. This bodes well
for the manufacturing payroll data in the Friday employment report.
Conditions in the service sector are less well documented for January,
but higher confidence and increased business activity suggests more use
of services. Annual revisions were released on Thursday, January 27.

The Chicago Purchasing Managers Business Barometer for January at
9:45 ET on Monday will offer one more hint as to the direction of the
ISM data. The index includes both manufacturing and service industries
in the survey.

The Dallas Fed’s Texas Manufacturing Outlook later in the morning
Monday is the last of the Fed District Bank factory sector surveys, and
should point in the same expansionary direction as its counterparts in
New York, Philadelphia, and Richmond.

The December data for new orders for factory goods at 10:00 ET
Thursday should be similar to the report on durable goods (-2.5%), and
higher prices for petroleum and chemicals. The transportation component
was particularly soft in the durable goods report due to a plunge in
civilian aircraft orders data. There may be some upward revision more in
line with the reported increase in Boeing orders for the month.

Personal income and spending for December out Monday morning will
probably reflect some modest increases in incomes and higher spending,
especially for durable goods. The PCE deflator should be consistent with
the very tame readings in the CPI report released earlier in the month.

The preliminary estimate of productivity and unit labor costs for
the fourth quarter 2010 at 8:30 ET Thursday should line up with the
preliminary GDP report. Productivity should be on the rise, and unit
labor costs increases modest.

Construction spending for December at 10:00 ET Tuesday could show
the weather impacts that restrained residential building in the month
were also an influence for the commercial side.

Sales of domestically-produced motor vehicles will be reported as
available on Tuesday. Sales may have difficulty holding on to the
moderate pace that was reported for October through December. Automakers
were generous in offering incentives during the holiday period and
after, but consumers turned less confident in January and may have been
more reluctant to buy. Same-store sales comparisons for fiscal January,
the end of the retail fiscal year, are likely to still be better than
the year-ago month.

The Reserve Bank of Australia makes its routine monetary policy
announcement on February 1 at 14:30 AEDT, which will be at around 22:30
ET Monday in the United States. At the December 7 meeting, the Board
determined that the cash rate was “appropriate for the economic
outlook.” The Bank is probably on hold for now.

The ECB’s Governing Council meets on Thursday. Monetary policy is
likely to be unchanged. The Bank will still have to consider the issues
related to sovereign debt woes in member nations, but the situation
appears more stable than when they last meet at mid-January.

The Bank of England’s Monetary Policy Committee usually meets the
same week as the ECB’s governors, but will not be in session until
Wednesday and Thursday, February 9 and 10.

Federal Reserve policymakers will return to public speaking
engagements as the blackout period around the FOMC meeting has ended.
Monday, Atlanta Fed President Dennis Lockhart is in Miami to speak to
Miami Data College students in a question and answer session. Wednesday,
Governor Elizabeth Duke is in Chapel Hill, NC to deliver remarks to the
Kenan-Flagler Business School.

Thursday, Chairman Ben Bernanke is at the National Press Club to
give a luncheon speech to be followed by a question-and-answer session.
Later that day, Minneapolis Fed President Narayana Kocherlakota in St.
Paul, MN to speak at the University of Minnesota.

The Treasury will announce its quarterly refunding package at 9:00
ET Wednesday. It will include new 3- and 10-year notes, and 30-year
bonds to be auctioned in the subsequent Tuesday through Thursday,
respectively. All will settle on February 15.

The refunding announcement will be preceded by the release of the
borrowing requirements at 15:00 ET Monday.

** Stone & McCarthy Research Associates **

[TOPICS: M$$FI$,M$U$$$,MAUDS$]