Apart from a brief flash of optimism last Thursday morning after the announcement of unexpectedly low initial unemployment claims, last week’s news from the demand side of the economic equation was almost uniformly bleak.
Initial unemployment claims did fall 37,000, to 335,000, for the week ended October 2. That same afternoon, however, the Federal Reserve revealed that following July’s $11.2 billion rise, consumer credit retreated $2.4 billion in August — the first decline since February.
More important, the Bureau of Labor Statistics surprised nearly everyone by reporting an increase in nonfarm payrolls of just 96,000 for September, compared with the consensus forecast of 150,000 compiled by Briefing.com.
And don’t blame the weather for the shortfall. The BLS report, taking note of the four hurricanes that struck in the past two months, stated that “at the national level, the severe weather appears to have held down employment growth, but not enough to change materially the Bureau’s assessment of the employment situation in September.”
“This morning’s report was a big disappointment,” Merrill Lynch economist David Rosenberg told CFO.com on Friday. “We’re not seeing much in the way of strength on the demand side.” Added Rosenberg, “I’m pretty sure that this employment data is going to anchor more weak economic news going forward.”
Ralph Kauffman, a professor at the University of Houston, sees crude oil — which hit a record $53 per barrel last week — as a key contributor to the economic malaise. His September report for the Institute for Supply Management, issued Tuesday, showed nonmanufacturing business activity rising for an 18th consecutive month, but at a slower rate than in August. That trend essentially tracks the ISM’s manufacturing report issued a week earlier. “Both of our reports are indicating a slowdown,” Kauffman told CFO.com. “The number one thing causing this is the price of oil [which is] taking discretionary income away from consumers.”
Looking ahead this week:
• Those trying to obtain the pulse of the employment situation will be glued to Thursday morning’s announcement of initial unemployment claims. For the week ending October 9, most analysts appear to be forecasting little change from the prior week’s 335,000.
• Friday morning will see the release of the producer price index for September. In August both this index and core PPI, which excludes food and energy, dropped 0.1 percent.
• That morning will also see the release of another closely watched indicator: retail sales, which according to the Briefing.com consensus is expected to rise 0.7 percent for September after falling 0.3 percent in August.