Posted on: Monday, January 5, 2004
U.S. year-end reports buoy hopes
By William Sluis
Chicago Tribune
The economy heads into a new year under full sail, or so the optimists are telling us. With growth in the third quarter of 2003 at a rarefied rate of 8.2 percent, there seem to be few clouds in the distance.
On the downside, there still are millions of workers who wonder when the job market will begin to loosen. While the unemployment rate has once again fallen below 6 percent, there is a sizable pool of available talent still untapped.
That brings us to Friday's employment report for December. Chicago economist Brian Wesbury is looking for it to show payrolls growing by a solid 150,000 positions, while joblessness holds steady at 5.9 percent.
The economy is doing a turnaround when it comes to forming jobs, "providing reasons to celebrate as we contemplate the new year," said Wesbury, of Griffin, Kubik, Stephens & Thompson, an investment firm.
He expects the next 12 months to be a boom time for those seeking positions, as the economy adds 3 million jobs.
"This seems like an astounding number, but we have done it before," Wesbury said. "Businesses have been investing strongly for the last six months or more, business leaders are growing confident, and now they are getting ready to do some serious hiring."
Meanwhile, the manufacturing sector, which has gotten a boost from the weakening dollar, will start to add to payrolls, he said.
"It is likely that jobs in factories held steady last month, which would be the first time in more than three years that they haven't fallen," Wesbury said.
A surprising bright spot for the economy has been the auto industry, which has revved up into high gear after hitting a brief skid at the end of summer. Traffic in showrooms is booming, even as Detroit scales back incentives.
Analysts are expecting today's report on December car and light-truck sales to show volumes humming along at an annual rate of 17.9 million units, well above the 16 million-unit level seen a few months earlier.
For the full year, automakers likely sold about 16.7 million vehicles, an advance from earlier forecasts. Although that total would be among the top five years on record, it still is the lowest since 1998. It also would be a shade below the incentive-driven numbers for 2002.
A long list of reports includes November factory orders tomorrow; the December nonmanufacturing index from the Institute for Supply Management, also tomorrow; and the month's discount- and department-store sales on Thursday.
Of the group, watch the reports from retailers. After much caterwauling about consumers being slow to trot out their wallets, sales at many stores are expected to show surprising strength. One reason: unusually kind weather conditions in the year's final two weeks.
In the months ahead, however, economists believe retail sales may be under pressure. Their reasoning: Homeowners have just about given up on refinancing, after using their real estate as a piggy bank over the past three years.
After a banner year in 2003, few analysts expect the stock market to be able to top its recent stratospheric performance. The big worry: Rising interest rates and the falling dollar could prompt foreigners to stage a mass exodus.
Wells Fargo & Co. economist Sung Won Sohn is warning clients that "considering robust economic growth, rising inflation expectations, the falling dollar and mounting budget deficits, bond yields are too low."
