How can America...
Enviado: 1/10/2003 14:56How can America be the biggest consumer for the world if americans don't have jobs to generate income to buy things the world has to offer ?
Growth at Midwest businesses slowed sharply in September while U.S. consumer confidence plunged to the lowest level since the start of the Iraq war, two reports showed on Tuesday.
Financial markets reacted harshly, with major stock gauges sliding and safe-haven Treasuries soaring after the surprisingly poor data raised doubts about the recovery's staying power.
"The Chicago Purchasing Managers' (index) fell off a cliff. It is an ugly report," said Cary Leahey, economist at Deutsche Bank Securities.
The news also stoked speculation the Federal Reserve may again cut its target interest rate from a 45-year low of 1 percent in coming months. Fed officials have said they could cut rates if layoffs mount despite faster economic growth.
After a brief spurt of August hiring, Chicago-area firms stepped up layoffs in September, according to the National Association of Purchasing Management-Chicago. A separate report from the Conference Board showed the "jobs hard to get" gauge in its Consumer Confidence Survey -- seen as a good indicator of labor market trends -- jumped to a nearly 10-year high.
Some economists fear the current bout of robust growth may wind down once the impact of the recent round of tax cuts starts to fade, with workers still losing jobs nearly two years after the recession ended. Consumer spending makes up two-thirds of economic activity.
Analysts and investors will look closely at Wednesday's report on national manufacturing from the Institute for Supply Management and the Labor Department's payrolls report on Friday for confirmation of the souring outlook. Forecasts are for 30,000 job losses in September after a 93,000 decline the prior month.
For now, corporate America is still getting rid of workers. Ford Motor Co. F.N said on Tuesday it will slash 2,800 salaried jobs in a bid to trim costs by the end of the year.
"People may be losing their faith in a strong recovery because of the job situation," said Stephen Stanley, senior market economist at RBS Greenwich Capital.
In response to the bleak data, the broad Standard & Poor's 500 index .SPX fell 1 percent and the benchmark 10-year Treasury note US10YT=RR soared more than a full point in price, pushing its yield down to 3.94 percent.
So far, low interest rates and big rebates have kept home and car sales humming at near-record levels despite consumers' anxiety. But economists fear shoppers may retrench if layoffs do not reverse soon.
The Conference Board's September confidence index fell to 76.8 from a revised 81.7 in August, weighed down by worries about jobs. That reading was much worse than economists' forecasts and was the lowest level since March.
The percentage of respondents sayings jobs are hard to get rose to 35.3 percent -- the highest since December 1993 -- from 34.1 percent the prior month. The rate was at 25.4 percent a year ago.
The index that measures expectations for the next six months slipped in September to 88.4 from 94.9, while the present situation index fell 59.5 from 62.0.
The Chicago purchasing managers group said its business index fell to 51.2 in September from 58.9, revealing a much slower pace of growth and much worse than forecasts of a smaller slip to 57.0. Any reading above 50 suggests expansion.
The employment component of the index dropped to 45.3 from 51.2 in August, erasing hopes that a turnaround in the labor market was on the horizon.
A breakdown of the Chicago indexes threw into question the sustainability of the recent bout of expansion among firms from Illinois to Wisconsin and Michigan. New orders growth was sluggish, suggesting demand slowed abruptly. Inventories were built up at a faster pace, meaning less production will be needed to meet future demand.
The third round of tax cuts has spurred robust consumer spending this quarter, but weekly retail sales data showed spending slowed in the third week of September. Still, auto makers are likely to announce yet another bumper month when they report September results on Wednesday.
Wal-Mart Stores, Inc. WMT.N said on Monday it was increasing its total selling space by 8 percent next year, suggesting it expects spending to remain robust. The giant retailer said earlier this week that September sales are running at the high end of its forecasts.
With consumption on track to grow about 7 percent this quarter for the strongest performance in 15 years, most economists see the overall economy speeding up to a 5.5 percent pace or higher in the third quarter from 3.3 percent the prior quarter.
But the fact that such growth acceleration cannot spur hiring worries economists. The main reason is that companies are using productivity enhancements to maintain or boost profit margins, hiking output even as they slim their work forces.
By contrast, solid job growth resumed about six months after the 1981-82 recession ended and about a year after the conclusion of the 1990-91 recession, according to economists at Goldman Sachs
By: Eric Burroughs/title graphics -Damon Vickers
Growth at Midwest businesses slowed sharply in September while U.S. consumer confidence plunged to the lowest level since the start of the Iraq war, two reports showed on Tuesday.
Financial markets reacted harshly, with major stock gauges sliding and safe-haven Treasuries soaring after the surprisingly poor data raised doubts about the recovery's staying power.
"The Chicago Purchasing Managers' (index) fell off a cliff. It is an ugly report," said Cary Leahey, economist at Deutsche Bank Securities.
The news also stoked speculation the Federal Reserve may again cut its target interest rate from a 45-year low of 1 percent in coming months. Fed officials have said they could cut rates if layoffs mount despite faster economic growth.
After a brief spurt of August hiring, Chicago-area firms stepped up layoffs in September, according to the National Association of Purchasing Management-Chicago. A separate report from the Conference Board showed the "jobs hard to get" gauge in its Consumer Confidence Survey -- seen as a good indicator of labor market trends -- jumped to a nearly 10-year high.
Some economists fear the current bout of robust growth may wind down once the impact of the recent round of tax cuts starts to fade, with workers still losing jobs nearly two years after the recession ended. Consumer spending makes up two-thirds of economic activity.
Analysts and investors will look closely at Wednesday's report on national manufacturing from the Institute for Supply Management and the Labor Department's payrolls report on Friday for confirmation of the souring outlook. Forecasts are for 30,000 job losses in September after a 93,000 decline the prior month.
For now, corporate America is still getting rid of workers. Ford Motor Co. F.N said on Tuesday it will slash 2,800 salaried jobs in a bid to trim costs by the end of the year.
"People may be losing their faith in a strong recovery because of the job situation," said Stephen Stanley, senior market economist at RBS Greenwich Capital.
In response to the bleak data, the broad Standard & Poor's 500 index .SPX fell 1 percent and the benchmark 10-year Treasury note US10YT=RR soared more than a full point in price, pushing its yield down to 3.94 percent.
So far, low interest rates and big rebates have kept home and car sales humming at near-record levels despite consumers' anxiety. But economists fear shoppers may retrench if layoffs do not reverse soon.
The Conference Board's September confidence index fell to 76.8 from a revised 81.7 in August, weighed down by worries about jobs. That reading was much worse than economists' forecasts and was the lowest level since March.
The percentage of respondents sayings jobs are hard to get rose to 35.3 percent -- the highest since December 1993 -- from 34.1 percent the prior month. The rate was at 25.4 percent a year ago.
The index that measures expectations for the next six months slipped in September to 88.4 from 94.9, while the present situation index fell 59.5 from 62.0.
The Chicago purchasing managers group said its business index fell to 51.2 in September from 58.9, revealing a much slower pace of growth and much worse than forecasts of a smaller slip to 57.0. Any reading above 50 suggests expansion.
The employment component of the index dropped to 45.3 from 51.2 in August, erasing hopes that a turnaround in the labor market was on the horizon.
A breakdown of the Chicago indexes threw into question the sustainability of the recent bout of expansion among firms from Illinois to Wisconsin and Michigan. New orders growth was sluggish, suggesting demand slowed abruptly. Inventories were built up at a faster pace, meaning less production will be needed to meet future demand.
The third round of tax cuts has spurred robust consumer spending this quarter, but weekly retail sales data showed spending slowed in the third week of September. Still, auto makers are likely to announce yet another bumper month when they report September results on Wednesday.
Wal-Mart Stores, Inc. WMT.N said on Monday it was increasing its total selling space by 8 percent next year, suggesting it expects spending to remain robust. The giant retailer said earlier this week that September sales are running at the high end of its forecasts.
With consumption on track to grow about 7 percent this quarter for the strongest performance in 15 years, most economists see the overall economy speeding up to a 5.5 percent pace or higher in the third quarter from 3.3 percent the prior quarter.
But the fact that such growth acceleration cannot spur hiring worries economists. The main reason is that companies are using productivity enhancements to maintain or boost profit margins, hiking output even as they slim their work forces.
By contrast, solid job growth resumed about six months after the 1981-82 recession ended and about a year after the conclusion of the 1990-91 recession, according to economists at Goldman Sachs
By: Eric Burroughs/title graphics -Damon Vickers