While much of the world, notably Asia, is crying out for a life raft, Americans are bobbing happily on the blue. Economic activity is near a 30-year crest, and nowhere is the summer scene more buoyant than in this country’s job market. But the global typhoon that is washing over export markets could eventually engulf more Americans. That means a close watch will be kept on Thursday’s June employment report. Chicago economist Brian Wesbury said, “It will provide the first clear indications that the problems in Asia are having some effect on the U.S. job market.” He looks for joblessness to rise to 4.4 percent from 4.3 percent a month earlier, while payrolls grow by just 170,000 jobs, down from 296,000 in May. “The report will be one of the first negative indicators for the job market in seven years,” said Wesbury, of Griffin, Kubik, Stephens & Thompson, an investment firm.
INTEREST RATES
BACK TO FED WATCHING
As the world struggles to lift Japan and its partners off the canvas, talk of higher interest rates has become scarce. Yet policymakers of the Federal Reserve, who will meet Tuesday and Wednesday, must remain alert against a potential for a rising inflation rate. Chicago banker Kenneth Skopec says the Fed’s meeting will produce no change in monetary policy. “To raise rates here would be kind of dangerous, especially in light of the difficulties facing the Japanese economy,” said Skopec, of Mid City Financial Corp. “If you look at 30-year mortgages, the pressure on interest rates seems to be downward, not up.”
ECONOMIC INDICATORS
A WEEK OF CLUES
A long list of economic indicators to be released this week includes May new-home sales Monday; June consumer confidence Tuesday; the June index of the National Association of Purchasing Management Wednesday; May leading economic indicators, Wednesday, and May factory orders Thursday. Economist M. Cary Leahey, who is looking for a drop in consumer confidence, said, “It should fade from its super-high 135.3 reading in May toward 130 or so in June.” Leahey, of High Frequency Economics in Valhalla, N.Y., also expects a slight drop in the purchasing managers index, from a reading of 51.3. Anything above 50 is seen as evidence that the manufacturing sector is growing.
STOCK MARKET
PROFIT PICTURE CLOUDY
The stock market last week overcame a period of pre-earnings report jitters, as analysts hailed a summer rally that pushed a major market index to an all-time closing high. Even so, there is a very murky picture for corporate profits, with less than two weeks before second-quarter results roll out. Because companies have seen their pricing power erode, earnings are expected to exceed year-earlier results by just 3 percent; that’s the slowest profit performance in seven years. Trading this week will be shortened, as stock, bond, futures and options markets will close Friday, for Independence Day. Banks, government offices and many businesses will also close.
