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Wednesday and Thursday show a slew of economic reports, all leading up to Friday’s employment data. On Wednesday, a number of reports were released including data on factory orders and the Fed Beige Book. Thursday’s releases have included the ADP Employment report, jobless claims and data on productivity and costs. The ISM Non-Mfg. Survey was also released today, along with results of same-store sales for many of the nation’s retailers.

A lot of data on the jobs market will be released this week and it started with the Challenger Job-Cut report yesterday. Job cut announcements came in at 88,736 in August, down from 103,312 in July, but higher than the year ago period when nearly 80,000 job cuts were announced. Though a second tier report, the Monster Employment Index rose two points to 159, but gains came in education and mining and were loss in manufacturing and construction.

The ADP Employment report showed a decline of 33,000 nonfarm private payrolls for August. With the expected 75,000 decline in government jobs, this puts the nonfarm payrolls report due out tomorrow at about a negative 100,000, which would be above current estimates for a decline of 75,000. The ADP data has been bouncing back and forth between gains and losses in 2008 with the BLS report in negative territory the whole time.

One problem for the jobs market is strength in productivity. When productivity is rising, it allows businesses to continue the same production with fewer employees and to increase supply without needing to hire. Overall, productivity growth is a positive for the economy, but at the current time, it does raise concerns about the jobs market. Productivity for the 2^nd quarter was revised sharply higher to growth of 4.3 percent from the initial reading of 2.2 percent. Estimates were for a revised figure of 3.3 percent growth. This resulted in a decline of 0.5 percent in unit labor costs, lower than the decline of 0.3 percent expected.

Same store sales for the week ending August 30 remained weak with the ICSC-UBS report showing year on year sales growth of 2.2 percent. The Redbook report wasn’t much better at growth of 2.3 percent. Both reports noted that back to school sales picked up, but that promotions kept total sales figures down. Not surprisingly, sales were stronger at discounters with consumers looking for bargains. Thus, Wal-Mart (WMT) saw same-store sales gains of nearly three percent during August, exceeding expectations. Back to school sales helped during the month, but discounting could hurt profits. Overall, more than half the chain stores reporting missed expectations.

The manufacturing sector remains a concern with the ISM Mfg. Index earlier this week at 50.0. However, factory orders rose 1.3 percent in July, 5-tenths more than expectations. Nondefense orders excluding aircraft rose 2.5 percent and this is an important measure of business spending. The ISM Non-Mfg Survey came in at 50.6, a bit above expectations, but remaining near the line between contraction and expansion. Like the ISM Index, this report showed a high reading in prices paid at 80.8 despite the fact crude prices continue to fall.

Speaking of crude, the weekly inventory data showed a larger than expected decline in supplies at a drop of 1.9 million barrels. Gasoline reserves also fell, down by a million barrels. Even so, crude prices have not changed much, down about half a dollar just below $109 a barrel. Slowing demand has pushed crude prices lower despite concerns about upcoming hurricanes. This decline in crude has resulted in a drop in gasoline prices at the pumps, which should continue to help improve sentiment.

On Wednesday, the Fed Beige Book was released ahead of the September FOMC meeting. This report showed that slowing continues throughout the 12 Fed districts. One major concern is the fact lending standards have tightened, making it difficult for consumers to get loans for homes. The report also noted that manufacturing continues to be weak with exports the one thing keeping the sector from showing even weaker results. Though the outlook for the economy is flat growth, this should ease Fed concerns about pricing pressures as prices fall on slower demand. This should leave the Fed on the sidelines at the Sept. 16 meeting and most likely throughout 2008.


Jody Osborne

Senior Staff Writer & Options Strategist

Optionetics.com ~ Your Options Education Site

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