Imports rising again, but it could be temporary
Jobless claims could drop, but would it really matter?
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) After a flood of mostly downbeat reports in the past week, only a trickle of economic news is scheduled for the coming week. Economists say the tone of the reports should be a little more favorable than it was last week, when an ugly payrolls report capped a week of mostly disappointing news.
Of course, that's what the economists promised last week, too.
None of the reports will change anyone's mind about the shape and pace of the recovery. At best, the data will show modest improvements in the services side of the economy, in domestic and foreign demand, and in the labor market.
The most talked-about report of the week will probably be the weekly jobless claims report. The median forecast of economists surveyed by MarketWatch is for a slight decline in initial claims from 551,000 to about 535,000. The figures will be released on Thursday. See Economic Calendar.
Few economists forecast this volatile number, and little should be read into its weekly gyrations.
Especially now, when whatever predictive power it once held has faded. Of 15.1 million Americans officially classified as unemployed in September, only 19.4% had been jobless less than five weeks, a record-low number. Layoffs can decline, as they have over the past four months, but it doesn't mean the unemployment rate will drop.
What's important now is how many people are being hired, not how many are being fired.
Unfortunately, the government doesn't have up-to-date information on hiring. On Friday, the Labor Department will report on job openings and hirings for August. In July, the data showed that there were over 6 unemployed people for every opening, a record-high number. Job openings had fallen 50% from the peak. See full story.
Trade
The trade balance is expected to widen in August to about $33 billion from $32 billion in July economists said. The report will be released on Friday.
Imports are once again growing, and they are growing faster than exports.
On one level, that's good news. Higher imports mean stronger U.S. demand, which is certainly a necessary condition to a sustainable recovery.
However, the increase in August could be a temporary thing, "due to a spike in petroleum and autos," wrote John Silvia, chief economist for Wells Fargo Securities. "These gains will likely not be sustainable."
The increase in auto imports was probably related to the government's cash-for-clunkers subsidy program, which boosted sales (and imports) in August, but which is now history. Sales collapsed in September.
The rise in petroleum imports was a function of higher prices.
Foreign trade should become a drag on U.S. gross domestic product in the third quarter, said Meny Grauman, an economist for CIBC World Markets. "Longer term, we still expect the U.S. trade deficit to keep shrinking as domestic consumption takes a back seat."
ISM
The services side of the economy was expanding in September for the first time in a year, economists predicted. The Institute for Supply Management non-manufacturing index probably rose to 50% in September from 48.4% in August. A 50% reading means half of the companies say business is getting better.
The ISM nonmanufacturing index doesn't have the track record of the ISM manufacturing index; it's only 12 years old. It's only been through one recession, but in that one, it rose above 50% three months after the official end of the recession.
The movement of the ISM toward 50% supports "the notion an economic recovery likely began in the third quarter," Silvia said.