WASHINGTON (AFX) - US economic indicators to be released this week will show that the nation's job market is slowly getting back on its feet as the rate of manufacturing layoffs eases and other sectors of the economy look to hire new workers. In a relatively light data week, most economists said they would be focusing on Friday's June nonfarm payrolls report amid concerns that corporate accounting scandals continue to overshadow fresh economic reports.
Mike Moran, chief US economist at Daiwa Securities in New York, forecast a 75,000 increase in nonfarm payroll employment. "If we see the numbers that I am projecting it would be consistent with an economy that is recovering, but not vigorously," said Moran. Despite the gain in payrolls, the unemployment rate may tick up a notch, Moran said, explaining that this is likely to occur because job growth is not yet robust enough to absorb all the workers who are coming into the labor force.
Ian Morris, US economist at HSBC Securities, said he would focus on employment in the manufacturing sector, which he said should show that "job losses in manufacturing appear to be abating" Morris is also anticipating that the services sector segment of the employment report should reflect "reasonable growth" on the back of improved demand from the temporary help and business services sectors.
Other economists also forecast a moderation in manufacturing job losses, and said it would be a sign that the sector has now turned the corner.
"Nevertheless, that may not stop the unemployment rate from rising," Morris said explaining that "the Jobs Hard to Get Index from the Conference Board's Consumer Confidence survey rose quite sharply, and that tends to track the unemployment rate quite well." A further rise in nonfarm payrolls would represent the third straight month in which payrolls have risen and Sung Won Sohn, chief US economist at Wells Fargo & Co in Minneapolis, said it would help underwrite an accelerating pattern of employment. Fresh data on June vehicle sales will also be released in the coming week with most economists projecting sales to show a better performance compared with May. Although car and truck sales are seen improving, they are still expected to languish below the levels seen earlier in the year.
"Domestic vehicles sales probably improved in June," Lehman Brothers economists said in their Global Weekly Economic Monitor adding that "rates on auto loans remain quite low by historical standards averaging just 7.5 percent this spring compared with over 9.0 percent last year." Detroit's Big Three auto makers ramped up their cash rebates and other marketing incentives in the wake of May's sales decline.
The Institute for Supply Management's (ISM) overall index of business activity is seen reflecting an slight improvement in the manufacturing sector for June. Asked if economic data is being overshadowed by the ongoing accounting scandals, Moran replied: "To a degree. The equity market is playing a important role in interest rate movements and movement in equity prices is tied to accounting scandals."
"There is definitely that link there, but I think it's too strong to say that the economic numbers are being ignored or playing no role at all, I would just say it is a diminished role," Moran concluded. Morris said the market impact of the weekly economic data is being diminished significantly by the accounting scandals.
"My feeling is that the cyclical outlook is still very much one where it could be strong in the second half, but the Fed will remain on hold if the equity market remains depressed," Morris said. Following are the consensus forecasts of Wall Street economists polled by AFX News for data to be released next week.
MAY CONSTRUCTION SPENDING, Monday (10:00 am): Economists expect construction spending to rise 0.2 pct in May after spending rose 0.2 pct in April. This would mark the second straight monthly increase.
ISM (EX-NAPM) JUNE MANUFACTURING INDEX, Monday (10:00 am): Economists forecast that the Institute for Supply Management's (ISM) overall index of business activity rose marginally to 55.8 in June from 55.7 in May.
May's reading was the highest since February. Another reading above 50.0 would represent the fifth straight month in which the index has remained above 50.0. An index reading above 50 means that the manufacturing sector is expanding.
JUNE VEHICLE SALES, Tuesday (afternoon, times vary): Economists said that domestic car and light truck sales are expected to rise 6.3 pct in June to 13.4 mln units on an annualised basis from 12.6 mln in May.
Including foreign producers, sales are seen rising 5.1 pct to an annual rate of 16.4 mln units from 15.6 mln in May.
WEEKLY JOBLESS CLAIMS, Thursday (8:30 am): Forecasts indicate that initial claims for regular state unemployment benefits fell slightly by 500 to a seasonally adjusted 387,500 for the week ended June 29 compared with the prior week.
Claims fell 10,000 to 388,000 in the previous week.
If claims stay around the 387-388,000 range, it would mark the fifth straight week in which claims have stayed under the psychologically key figure of 400,000.
MAY FACTORY ORDERS, Thursday (10:00 am): Economists say that factory orders for manufactured goods rose 0.4 pct in May after rising 1.2 pct in April.
If orders rise again it will mark the sixth straight monthly increase in the indicator.
ISM (EX-NAPM) JUNE NON-MANUFACTURING INDEX, Wednesday (10:00 am): Economists expect the Institute for Supply Management's overall index of non-manufacturing activity to fall to 57.0 in June from 60.1 in May.
An above 50.0 reading in the index would mark the fifth straight month in which the index has remained above 50.0.
JUNE NONFARM PAYROLLS EMPLOYMENT REPORT, Friday (8:30 am): Economists forecast that nonfarm payroll employment rose by 84,000 in June after payrolls rose by 41,000 in May.
This would be the largest rise in payrolls since Dec 2000.
Another rise in payrolls would mark the third straight increase after 12 consecutive monthly declines.
The unemployment rate is expect to rise to 5.9 pct in June after it fell to 5.8 pct in the prior month from 6.0 pct in April.
Average hourly earnings are seen rising 0.3 pct after earnings rose 0.2 pct in May.
Lehman's economists said that "slack labor markets are putting downward pressure on all the wage measures, a trend we expect to continue through the balance of the year."