WASHINGTON (AFX) - Economists will sift through this week's US economic data for early signs of how the Sept 11 terrorist attacks are impacting the economy, and they expect the data to show a continuing rise in unemployment and further declines in manufacturing activity. Tomorrow's scheduled meeting of the Federal Open Market Committee is, however, likely to command the most attention in the coming week, and a majority of economists are now calling for a 50 basis points reduction in the FOMC's key fed funds interest rate which would potentially trim rates to 2.50 pct.
"The FOMC will be the key, after that, normally the payrolls would be the big number, but the problem is that because the survey reference week occurred the week of the terrorist attack here and in Washington, the data are not necessarily going to reflect that," said Michael Carey, a US economist at Credit Lyonnais in New York.
Economists said many workers who were on company payrolls on Sept 10 -- one day before the terrorist attacks on the World Trade Center and the Pentagon -- would be listed on payrolls through to the end of that week despite the fact that thousands of workers no longer remained on the same corporate payrolls by the week's end.
"The reference week for the September employment report was the week that began September 9 and ran through to September 15, so anyone who was on a company's payroll, even for one week, will show up as being employed, so the number in September payrolls should not be materially influenced by the fallout of the attacks," said Dana Saporta, a US economist at Stone & McCarthy Research Associates in Princeton, NJ.
September total nonfarm payroll employment is seen falling by 93,000, according to an AFX News weekly economic poll. "The October payroll will fully capture the immediate fallout," Saporta noted.
However, the closure of many factories during the week of Sept 11 is likely to depress the employment report's data on hours worked and the workweek, but conversely give a boost to average hourly earnings for the period.
Stone & McCarthy has revised down its forecast for the private work week to 33.9 hours, from an original forecast of 34.1 hours as a result of the events on Sept 11.
Rick MacDonald, a US economist at Standard & Poors MMS in Palo Alto, CA, agreed with Stone & McCarthy's expectation that the employment report is likely to show a decline in the work week. "There is some risk that the work week could be depressed which has this effect of boosting hourly earnings because the pay (even if workers are temporarily at home) is the same. The combination of the two equals aggregate pay, so if you have the same amount of pay and the work week goes down, it boosts hourly earnings," MacDonald stressed. "Next month (October) is where you will see the big impact," he added.
Until October's employment report is released, economists are looking more closely at the Labor Department's weekly update on initial jobless claims.
However, they said that the latest week's data might not show as large a jump in claims as would be expected because many laid off workers are already likely to have filed their claims.
A consensus of economists polled by AFX News estimate that initial claims for regular state unemployment benefits will rise by 9,000 to a seasonally-adjusted 459,000 for the week ended Sept 29, after claims rose by 58,000 to 450,000 for the previous week.
The hike in claims to 450,000 represents the highest level of claims since the week ended July 25, 1992.
New York State has waived the waiting period for the filing of initial unemployment claims, so an as yet unquantified number of people to be reported in this week's data, may have already filed their claims.
Economists said this might explain why forecasts for the week ended Sept 29 are not expected to rise as dramatically as for the prior week ended Sept 22.
Prior to tomorrow's gathering of the FOMC board, the markets expect today's National Association of Purchasing Managers' manufacturing index to show a fall in activity, but the association has yet to fully clarify how much of its survey relates to the post-attack period, economists said.
"It's not clear to us how much of the NAPM is going to post Sept 11. The non-manufacturing had been lagging manufacturing on the way down, we think it may be has a little bit more downside," said Saporta.
"You have finance for example which is within manufacturing, so is travel, the airline industry, the post-attack world is one in which the travel industry will be quite weak and there will be some effect on finance as well considering where the (World Trade Center) attack was focused," Saporta added.
"The post-attack impact on consumer confidence and job prospects has been significantly negative in our view...all that is pointing to a recession," Credit Lyonnais' Carey concluded.
Most economists now agree that the economy is on the verge of going into a recession that will trigger at least two consecutive periods of negative GDP growth, and is also likely to lift the unemployment rate above 5.0 pct in coming months.
Following are the consensus forecasts of Wall Street economists for data to be released this week.
AUG CONSUMER SPENDING AND PERSONAL INCOME, Monday (8.30 am): Economists expect consumer spending and personal income to rise 0.3 in August respectively.
Spending rose 0.1 pct in July, marking its smallest increase since October 2000, while personal income increased 0.5 pct.
AUG CONSTRUCTION SPENDING, Monday (10.00 am): Economists forecast that construction spending declined 0.2 pct in August, after spending fell an unexpected 0.1 pct in July.
NATIONAL ASSOCIATION OF PURCHASING MANAGERS SEPT MANUFACTURING INDEX, Monday (10.00 am): Economists expect the NAPM manufacturing index to fall to 45.0 after the index rose above expectations to 47.9 in August.
NATIONAL ASSOCIATION OF PURCHASING MANAGERS SEPT NON-MANUFACTURING INDEX, Wednesday (10.00 am): Forecasts indicate that the NAPM index of non-manufacturing business activity to decline to 43.0, after the index contracted to 45.5 in August.
WEEKLY JOBLESS CLAIMS, Thursday (8.30 am): Forecasts indicate that initial claims for regular state unemployment benefits to increase by 9,000 to a seasonally-adjusted 459,000 for the week ended Sept 29, after claims rose by 58,000 to 450,000 for the previous week.
AUG FACTORY ORDERS, Thursday (10.00 am): Economists say that factory orders for manufactured goods declined 0.4 pct in August after orders rose unexpectedly by 0.1 pct in July.
SEPT TOTAL NON-FARM PAYROLL EMPLOYMENT, Friday (8.30 am): Economists expect total nonfarm payroll employment to fall by 93,000 in September, after employment fell by a weaker than expected 113,000 in August.
The unemployment rate is seen rising to 5.0 pct in September after the unemployment rate rose to 4.9 pct in August from 4.5 pct in July to its highest level since Sept 1997.
Average hourly earnings are seen rising by 0.3 pct in September, following an expected gain of 0.3 pct in August.
AUG CONSUMER CREDIT, Friday (3.00 pm): Economists expect consumer credit to rise by 200 mln after credit remained virtually unchanged from the previous month on a seasonally-adjusted basis in July July marked the second consecutive month without an increase following a consistent rise in credit since Nov 1997.