By Theresa Sheehan
PRINCETON (SMRA) – The routine release of nonfarm payrolls data in
the week ahead, which falls on the first Friday of April, means some of
the sector reports that normally feed into forecasters’ estimates will
not have been released until afterwards.
This calendar quirk means there may be a greater than usual
uncertainty in markets as the 8:30 EDT release time approaches.
The week features a number of economic data reports, but
by-and-large most of these will pale in comparison to the employment
numbers, and will serve only to flesh out what is already known for
consumer confidence, housing, and manufacturing. Markets may have to
wait until the April 11 week to get any more data of significance after
the employment numbers.
There are numerous public appearances by Fed officials over the
course of the week. We expect no real surprises regarding individual
views on monetary policy, the large scale asset purchase program, or
inflation expectations. We do expect a generally more upbeat outlook for
economic conditions, and more hints of the Fed’s preparedness to
withdraw accommodation at an appropriate time.
Data from the Bureau of Labor Statistics on March unemployment and
nonfarm payrolls is set for release 8:30 EDT Friday. Early expectations
for nonfarm payrolls center around a 200,000 gain, but the range between
the low and high forecasts is wide, suggesting a lot of uncertainty.
Estimates for the unemployment rate are closely clustered around 8.9%
within a range of 8.8% to 9.0%.
Weekly initial jobless claims have been trending lower, but that
only indicates fewer layoffs and not necessarily more hiring. Decreases
in continuing claims may be due to some beneficiaries finding jobs, but
there are those who are simply running out of benefits.
The implications for the unemployment rate are that the decreases
in claims in the last three months are no fluke. While the pace of
improvement to the unemployment rate may slow, it should still continue
to inch lower.
Initial claims for the week-ended March 26 will be released
Thursday morning and will include the annual revisions — when the ETA
introduces the new seasonal adjustment factors for 2011. The
week-to-week levels may be somewhat different, but the fundamentals will
be the same. The survey comparison weeks for March from February may be
slightly revised.
The only piece of data during the week with the potential to alter
the outlook for most employment forecasts is the ADP National Employment
Report for March. Released Wednesday morning, the report has had a few
big misses in the last few months, but the February number appeared to
be back on track.
Other labor market data includes the Challenger Report for March at
7:30 EDT Wednesday and the Monster.com Employment Index for March
released in the early hours of Thursday. The Challenger data should
confirm the generally slower trend in layoff activity outside of the
government/nonprofit sector. The Monster.com measure dipped in January,
but regained ground in February and could well be higher still in March.
The Conference Board’s report on the Consumer Confidence Index for
March at 10:00 EDT Tuesday will include measures of how consumers
perceive job market conditions. These are likely to remain quite
pessimistic, but there have been some slight changes for the better in
the trends.
The overall index for consumer confidence is expected to follow the
lead of other indexes of consumer attitudes and turn lower. Consumers
have reacted negatively and promptly to geopolitical events and natural
disasters around the world, and the consequences that have resulted in
higher prices for food and gasoline, and greater uncertainty in the job
market.
The ISM national manufacturing index for March at 10:00 EDT Friday
will be released after the employment report. Some of the attention
usually given to the index will be lost in the timing. However, it
should offer confirmation of the regional reports from the Fed District
Banks and the Purchasing Managers on conditions in the factory sector.
So far the indexes related to general conditions in the New York,
Philadelphia, and Richmond Districts have been for solid expansion.
The remaining Fed District Bank manufacturing sector surveys for
March are the Dallas Fed’s Texas Manufacturing Outlook at 10:30 EDT
Monday and the Kansas City Fed’s Survey of Manufacturing at 11:00 EDT
Thursday. We expect these will signal continued expansion as well.
The Chicago Purchasing Managers Business Barometer for March is
scheduled for 9:45 EDT Thursday. The index has been consistently high
for over a year. The survey encompasses both manufacturing and
nonmanufacturing industries. The proximity of its release to the
employment data may make the employment component of interest in setting
last-minute expectations for payrolls, but it will not change any
forecasts.
Factory orders for February will be released at 10:00 ET Thursday.
Durable goods orders were already reported down 0.9% for the month.
Nondurable goods orders should reflect continued increases in
commodities like petroleum.
The NAR Pending Home Sales Index for February at 10:00 ET Monday
will complete the data on the housing market available for that month.
Low consumer confidence and difficulties in getting mortgages as home
values continue to slip will restrain the number of sales pending.
The S&P/Case-Shiller Home Price Index for January Tuesday morning
will complement the available data in the FHFA House Price Index
released a week earlier. At the moment home prices seem to be declining
slightly, in part due to mortgage appraisals coming in lower than they
might be without the widespread foreclosures.
February construction spending data, published at 10:00 ET Friday,
will also get a little lost in the wake of the employment report’s
release. While the numbers for residential construction will be pretty
well known, there will be some new data on home renovation and repair.
Private spending on commercial properties will probably remain soft, as
will public construction projects.
The report on personal income and spending in February will
probably reflect little growth in wages and salaries, and the slow pace
of the first tax refunds of the 2011 filing season. Personal consumption
expenditures will get some upward momentum from durables, which will
include robust car sales. The PCE deflator may inch a bit higher in line
with the CPI report, and show retreating deflationary risks.
Sales of domestically produced motor vehicles in March may extend
the stronger readings in January and February as automakers continue to
offer generous incentives, and consumers have a greater need to replace
aging vehicles after several years of putting of big ticket purchases.
There are no major central bank monetary policy announcements on
the calendar in the next week, although the pace picks up quickly in the
April 4 week. However, if there is a need for action in response to one
of the geopolitical shocks or natural disasters that have crowded
headlines in the last few weeks, there may be some unscheduled
announcement.
During this past week and in the upcoming one, a number of Fed
officials will be traveling abroad to speak at various symposia, as well
as making public appearances closer to home. It is a busy schedule and
the announced topics should help clarify the Fed’s expectations for the
US economy and the outlook for monetary policy.
Governor Kevin Warsh will be leaving towards the end of the week.
This will leave two vacancies on the Board of Governors. Nominee Peter
Diamond had his hearing before the Senate Banking Committee on Tuesday,
March 8. No confirmation vote has been taken by the Senate. President
Obama has not put forward another name for Warsh’s unexpired term, which
runs through January 31, 2018.
There are no new coupon offerings until Thursday, April 7 when the
next leg of the refunding will announce new 3-year noted and reopenings
of the 10-year notes and 30-year bonds. New 2-, 5-, and 7-year notes
will be auctioned next week on Monday through Wednesday, respectively.
All of these will settle on March 31.
** Stone & McCarthy Research Associates **
[TOPICS: M$$FI$,M$U$$$,MAUDS$]
