Key U.S. Data Releases and Events

Overall, however, further declines in employment and hours continue to put downward pressure on the growth of disposable income, and the props from the economic stimulus payments have largely been pulled out. That leaves the economy to stand up on its own very wobbly legs starting in August. The administration plan for dealing with the Fannie Mae/Freddie Mac crisis is expected to be unveiled shortly—its exact timing is subject to a considerable amount of speculation.

KEY U.S. DATA RELEASES THIS WEEK

Tuesday, September 2 – Construction Spending (Jul.)

Construction Put in Place
Global Insight: -0.5%
Consensus: -0.4%
Last Actual: -0.4% (Jun.)

Construction Excl. Residential Improvements
Global Insight: -0.5%
Last Actual: -0.5% (Jun.)

What to Look For

• Construction spending to drop by 0.5%.
• The main driver will be a decline in residential construction

Implications

For July, we are projecting a 0.5% drop in construction spending. Excluding improvements, spending will also drop 0.5%. Construction activity continues to be dragged down by further declines in single-family housing starts. The only silver lining is that the drag on growth from declines in residential construction is starting to diminish.

Tuesday, September 2 – ISM Manufacturing Index (Aug.)

Global Insight: 50.5
Consensus: 50.0
Last Actual: 50.0 (Jul.)

What to Look For

• A mild upward bounce to 50.5.

Implications

The ISM-manufacturing index should poke its head just over the 50-mark to 50.5, showing a small expansion in the manufacturing sector. Regional readings have been decent for August. The combination of export gains, import substitution, and the production effects of the economic stimulus payments should have put a brief hold on retrenchment in manufacturing, but not much of a pause. Export orders are expected to continue to expand, albeit at a slower rate.

Wednesday, September 3 – Motor Vehicle Sales (Aug.)

Global Insight: 13.1 Mil.
Consensus: 13.0 Mil.
Last Actual: 12.5 Mil. (Jul.)

What to Look For

• We expect 13.1 million sales for August, up from 12.5 million in July.

Implications

Inventory constraints on hot-selling passenger cars will continue to hurt monthly sales levels. However, receding gasoline prices and month-end manufacturer incentive programs will help support better results than July. The performance of third-quarter consumption depends heavily on a rebound in auto sales in August and September. Without a fairly forceful rebound, real consumption spending could stagnate or even go negative.

Thursday, September 4 – Productivity, preliminary (Percent change, Q2)

Nonfarm Business Productivity

Global Insight: 4.0%
Consensus: 3.5%
Last Actual: 2.2% (Q2, preliminary)

Unit Labor Costs

Global Insight: -0.8%
Consensus: 0.1%
Last Actual: 1.3% (Q2, preliminary)

What to Look For

• Second-quarter productivity growth will be revised up sharply to 4.0%.
• There will also be a small downward revision to hours.
• Unit labor costs are likely to show a decline in the second quarter.

Implications

The production side of the economy is doing well—no surprise, in view of the strong productivity numbers that we have seen in the first half of 2008. The yearly growth in unit labor costs ran well under 1% in the first half of 2008, reinforcing the notion that there is no general inflationary process embedded in the economy. This is good news for the Federal Reserve.

Thursday, September 4 – ISM Nonmanufacturing Index (Aug.)

Global Insight: 49.5
Consensus: 49.5
Last Actual: 49.5 (Jul.)

What to Look For

• The ISM index for services holds steady.

Implications

The ISM index for services is expected to remain about unchanged at about 49.5 in August. Freight activity picked up slightly, but that was offset by a decline in July chain store sales and a sharp drop in light-vehicle sales. The stock market eked out a small gain in August, but employment conditions will deteriorate further as the financial sector continues to shrink.

Friday, September 5 – Employment Report (Aug.)

Nonfarm Payrolls

Global Insight: -90,000
Consensus: -75,000
Last Actual: -51,000 (Jul.)

Unemployment Rate

Global Insight: 5.7%
Consensus: 5.7%
Last Actual: 5.7% (Jul.)

Average Hourly Earnings

Global Insight: 0.3%
Consensus: 0.3%
Last Actual: 0.3% (Jul.)

What to Look For

• Payrolls to shrink by 90,000 jobs.
• Unemployment rate to stabilize as teens go back to school.

Implications

Forecasting the payroll report is even more difficult than normal this August. Unemployment insurance claims have soared, but it is not clear how much of that reflects a deteriorating labor market and how much is a side-effect of the federal extended unemployment benefits program. We have assumed that there is some underlying deterioration, and project a 90,000 loss in payroll jobs, compared with a 51,000 loss in July. We assume that the unemployment rate holds steady at 5.7%. The unemployment rate for teens—very elevated over the summer—is likely to drop back as students leave the labor force and return to school.