Key U.S. Data Releases and Events

Speeches by Fed officials will kick off early in the New Year with an address by Chairman Ben Bernanke to the American Economic Association meetings in Atlanta on January 3. FOMC minutes from the December 15–16 meeting, to be released on January 6, will provide more-detailed clues on the Fed's updated outlook for the economy and evolving plans for an eventual exit strategy. More recently, the Fed's economic forecasts have been closer to the mark.

We still expect the Fed to stick to its guns on the current low-interest policy through at least the first half of 2010—both inflation and output are running below the Fed's target, credit aggregates continue to shrink at uncomfortable rates (reflecting an unholy alliance of tight credit conditions and constrained demand for credit), and bank charge-offs are still rising, frustrating efforts by most banks to replenish capital reserves.

KEY U.S. DATA RELEASES THIS WEEK

Monday, January 4 – Construction Spending (Nov.)

Construction Put in Place

• IHS Global Insight: -0.7%
• Consensus: -0.5%
• Last Actual: 0.0% (Oct.)

Construction Excl. Residential Improvements

• IHS Global Insight: -0.8%
• Last Actual: -1.1% (Oct.)

What to Look For

• We project that construction spending fell 0.7% in November (but down 0.8% excluding residential improvements).

Implications

The downturn in nonresidential construction is intensifying. For November, we are projecting a 2–3% decline in this category. Downward revisions are also likely. Two nonresidential categories have been in a freefall recently: lodging and a part of manufacturing construction that the Census Bureau does not itemize. Expect big drops in both categories. Single-family residential spending should post a smaller gain than in recent months because single-family housing starts have flattened recently. Government construction is also expected to post a small increase. But multi-family construction will likely post another outsized loss.

Monday, January 4 – ISM Manufacturing Index (Dec.)

• IHS Global Insight: 54.3
• Consensus: 54.1
• Last Actual: 53.6 (Nov.)

What to Look For

• The overall index is expected to move up by just under a point.

Implications

The regional surveys from Chicago, Dallas, and Philadelphia all showed improvement, outweighing softer readings from New York and Richmond. Inventory slashing has ended, so orders and production are now on the rise.

Tuesday, January 5 – Motor Vehicle Sales (Dec.)

• IHS Global Insight: 10.7 Mil.
• Consensus: 11.0 Mil.
• Last Actual: 10.9 Mil. (Nov.)

What to Look For

• We expect sales to track near 10.7-million units (annual rate).

Implications

The year-end incentive push by manufacturers should help auto sales finish the year with some momentum. We expect a 10.7-million-unit sales pace. At year's end, all manufacturers will finish 2009 below 2008 levels, with the exception of Hyundai-Kia and Subaru.

Wednesday, January 6 – ISM Non-Manufacturing Index (Dec.)

• IHS Global Insight: 51.0
• Consensus: 50.5
• Last Actual: 48.7 (Nov.)

What to Look For

• The ISM index for services industries is expected to rebound in December to a level close to 51.0.

Implications

Freight activity continued to move up through November, although rough weather may have temporarily disrupted some freight loadings in mid-December. Financial markets maintained good positive momentum. However, employment conditions are still expected to be a drag on the composite index, with an employment index reading still tracking below 50.

Friday, January 8 – Employment Report (Dec.)

Nonfarm Payrolls

• IHS Global Insight: -30,000
• Consensus: No change
• Last Actual: -11,000 (Nov.)

Unemployment Rate

• IHS Global Insight: 10.1%
• Consensus: 10.0%
• Last Actual: 10.0% (Nov.)

Average Hourly Earnings

• IHS Global Insight: +0.2%
• Consensus: +0.2%
• Last Actual: +0.1% (Nov.)

What to Look For

• Payroll employment is expected to decline by a shallow 30,000.
• The unemployment rate is expected to tick up to 10.1%.

Implications

Continuing declines in initial unemployment insurance claims indicate that the labor market is stabilizing. December could be the month where we see the first increase in payroll employment since December 2007; even if it does not happen this month, job gains will not be long delayed. Job losses slowed so sharply in November that we think a modest setback is more likely this month, and expect payroll employment to decline by 30,000 (after an 11,000 loss in November). The unemployment rate is likely to edge up to 10.1%, after dipping to 10.0% last month. Unemployment will be slower to turn around than employment, since workers who had previously given up looking will come back to the labor force when they see the market improving.