Analysts will be looking at the economic calendar this week to corporate earnings, manufacturing data and the latest jobs report from the Labor Department.
The February jobs report will top off a busy economic calendar next week that will also see data from the ISM on the state of the manufacturing sector and earnings from corporate giants Exxon Mobil (NYSE:XOM), which will be out on Monday, and General Motors (NYSE:GM) that is due out on Wednesday.
First, a report on personal income is due out on Monday, which will give analysts another piece of the consumer puzzle after consumer sentiment data showed January readings were flat, though at their highest level since ’04.
Auto industry data will come next on Tuesday, and economists expect another healthy report following the close of the best year seen by automakers since the Great Recession ended. However, a number of public surveys still don’t jive with official industry data, as car-buying still isn’t on Americans’ to-do lists. These surveys stand in direct contrast to December data, which found lower gas prices fueling auto sales.
A report on international trade will be due out on Thursday, which will add to several different economic discussions. First, the report will give more insight to the strength of headwinds facing the U.S. economy from Europe, but will also impact the discussion on trade making its way through the U.S. Congress.
The biggest trade deal of Obama’s term — the U.S.-Korea trade pact modeled on NAFTA — has been a job-killer for American workers, according to the liberal group Public Citizen.
“Since the Obama administration used Fast Track to push a trade agreement with Korea, the U.S. trade deficit with Korea has grown 50 percent — which equates to 50,000 more American jobs lost,” the group’s recent report stated. “The U.S. had a $3 billion monthly trade deficit with Korea in October 2014 — the highest monthly U.S. goods trade deficit with the country on record.”
The ISM Manufacturing Index, which is due out Friday, will be closely scrutinized to observe sentiment among purchasing managers relating to production, the status of new orders, the amount of order backlogs, business inventories, customer inventories and supplier shipments. On the heels of a report showing the estimated slowdown in U.S. GDP, which was fueled by trade gap data, both exports and imports will also tell the economic tale.
But the data on U.S. labor markets will make the most headlines, for better or worse.
The January jobs report due out Friday will be used by the Federal Reserve to craft future monetary policy, particularly the timing and trajectory of interest rate hikes expected to come in mid-2015, or specifically June. Analysts are anticipating another month of job creation above 200,000, while forecasts say the unemployment rate will fall slightly lower than its current 5.6 percent.
However, what the Labor Department report says regarding wage growth is more important to everyday working Americans and the Federal Reserve. Higher wages, which would then push inflation higher toward the Fed’s 2 percent target, would be viewed as a sign of a truly healthy economic condition.
That has clearly not been the case, despite the fact roughly 3 million Americans found jobs in 2014 and the unemployment rate fell significantly. The fact remains that the majority of jobs created are low-paying, part-time jobs that cannot sustain American families. Further, while any number above 200,000 is generally celebrated, the American economy must create an average of 250,000 jobs monthly in order to simply keep pace with population growth.
With the labor participation rate hovering down at a 36-year low, the unemployment number may slip further into irrelevance in reality, while the importance of the employment-to-population ratio grows.
