Week Ahead for the Economy: Focus On September Jobs Report!
by Ian Harvey
September 29, 2012
Economic reports dominate the news flow this week, with the September non-farm payroll report coming out on Friday as the most significant. The tepid pace of jobs improvement has been a persistent source of frustration for investors. But the loss of momentum in the manufacturing sector in recent months has added to those worries. The two ISM surveys on deck this week will give a good sense of where the factory and service sectors stood.
These factors may provide plenty of excuses to take profits in the week ahead, beginning with Monday’s ISM manufacturing data, again expected to show weakness in the sector.
Manufacturing reports from China, over the weekend, and from Europe, also Monday, will provide a look at just how sluggish global activity has become.
Friday’s jobs report is expected to show the low level of job creation continued in September, after Augusts’ 96,000 nonfarm payrolls.
The U.S. election is also a focus in the week ahead, with the first presidential debate in the tight race Wednesday evening.
Earnings in the Week Ahead
TOP OPTIONS TRADES SINCE JULY 01, 2012
|DLTR Aug 110 Calls||32%||UIS Oct 17 Calls||79%|
|HSY Aug 70 Calls||56%||TSO Nov 25 Calls||54%|
|NKE Oct 92.50 Calls||49%||HLF July 47.50 Calls (again)||38%|
|FB Aug 25.00 Puts||500%||DISH Sept 30.00 Calls||100%|
|APPL Jan 13 650.00 Calls||71%||CSTR Oct 42.50 Puts||400%|
|LNKD Aug 92.50 Puts||30%||LNKD Aug 100.00 Calls||250%|
|SLV Nov 30.00 Calls||114%||JCP Nov 25.00 Calls||67%|
|GLD Nov 165.00 Calls||72%||LVS Dec 45.00 Calls||67%|
|GLD Oct 170.00 Calls||52%||MON Jan 2013 87.50 Calls||26%|
Economy in the Week Ahead
This week’s news for the economy may shed more light on the economy. The PMI Manufacturing Index and ISM Manufacturing Index are both out on Monday, along with construction spending.
Wednesday we get a preliminary reading on the jobs outlook with the ADP Employment report, as well as the ISM Non-Manufacturing report. Thursday brings jobless claims and factory orders, followed Friday by the monthly jobs report.
The September jobs report is due in the week ahead and the numbers could play an important role in the upcoming presidential election.
Jobs are undoubtedly the central theme of this campaign. President Barack Obama, if he expects to win re-election, has to convince voters that his policies are addressing the causes of a stubbornly high unemployment rate (8.1% in August). A lousy jobs report just a month before the Nov. 6 election won’t be helpful.
Former Massachusetts Gov. Mitt Romney, the Republican candidate, has argued that Obama’s policies on the economy have failed and that the recovery should be much farther along nearly four years removed from the financial crisis brought on by the collapse of the U.S. housing market.
Both campaigns will certainly attempt to spin the job numbers in their favor when they are released on Friday.
Also, the ECB and BOJ are set to meet on Thursday, with the Bank of Japan's meeting extending until Friday.
Earnings: FerrellGas Partners (FGP)
• 10.00 am ISM manufacturing
• 10.00 am Construction spending
• 12.00 pm San Francisco Fed President John Williams makes opening remarks comments at capital markets conference
• 12.30 pm Fed Chairman Ben Bernanke speaks on economy, takes questions at Indiana Economics Club
Earnings:Family Dollar (FDO), Monsanto (MON), Marriott (MAR)
• 8.15 am ADP employment
• 10.00 am ISM nonmanufacturing
• 2.00 pm FOMC minutes
• 7.45 pm St. Louis Fed President James Bullard on monetary policy
• First presidential debate
Earnings: International Speedway (ISCA)
• Chain stores September sales
• 8.30 am Initial claims
• 10.00 am Factory orders
Earnings: Constellation Brands (STZ)
• 8.30 am Employment report
• 1.00 pm Fed Gov. Elizabeth Duke on real estate at New York Fed
• 3.00 pm Consumer credit
Reports for the Economy to Watch in the Week Ahead
Monday, October 01
The week begins with the release of an important economic indicator: the September Institute for Supply Management or ISM Index -- this number will call into question the entire economic slowdown.
Also, if the news out of China over the weekend shows the number is bad, then we will hear about how companies are already cutting back, slamming on the brakes in anticipation of the fiscal retaining wall.
The German Purchasing Managers Index or PMI for manufacturing will also be released Monday. Despite the German stock market being up around 22 percent year-to-date, the country is seeing some weaker economic numbers as of late – which may be beneficial as the weak data could help the overall global economy.
Construction spending data is also due Monday and the numbers are significant to any economic recovery. The Federal Reserve’s recent foray into purchasing mortgage backed securities was designed in part to jolt the housing market in an effort to stimulate construction of single and multi-family homes. More construction means more jobs.
Tuesday, October 02
Auto sales are reported Tuesday. Truecar.com expects car sales rose 11 percent from last year to 1.2 million, for a seasonally adjust selling rate of 14.6 million compared to 14.5 million in August.
Auto sales have been strong --they’re probably closer to the average for the full year -- we haven’t seen deterioration yet, with the personal consumption data still holding up pretty well.
Wednesday, October 03
On Wednesday, the ISM will release its U.S. services-sector Purchasing Managers' Index, which could show a slight deceleration in the pace of growth in the non-manufacturing sector.
Payroll firm ADP’s employment report is out Wednesday and it often provides a forecast of the government’s report later in the week.
Thursday, October 04
On Thursday, the central bank’s Federal Open Market Committee will release the minutes from the September meeting at which policy makers unveiled the mortgage bond buying program. As always, Fed watchers will be parsing the minutes for clues about future Fed policy.
Also, when the European Central Bank speaks Thursday, investors will hope to hear that Spain has met its endpoints and the bailout money is ready, if any Spanish banks should need it.
Friday, October 05
Finally, the Labor Department will release its September nonfarm payroll data Friday.
The non-farm payrolls for September are seen up 115,000, while the U.S. unemployment rate is seen ticking up 0.1 percent from August to 8.2 percent in September.
There was a downbeat number last time, but it didn’t hurt the market because the Fed then committed to a full out war against deflation -- referring to the U.S. Federal Reserve’s announcement of another round of monetary policy known as quantitative easing, which is intended to jumpstart the economy. Investors should use caution because if the employment report is weak, the stock market could get hammered.
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