Manufacturing, Retail Keys to Jobs Report

The key things to look for in Friday's employment report are whether manufacturing, retail sales and construction are improving.

Since December 2007, the economy has been shedding jobs, and a sharp uptick in employment would indicate the recession is ending.

In December, the economy lost 85,000 jobs after gaining 4,000 in November and losing 127,000 in October. The unemployment rate stood steady at 10%, largely because 843,000 unemployed adults became discouraged and left the labor force -- quit looking for work.

For January, analysts are ambivalent, forecasting no change in the jobs count and a slight uptick in unemployment to 10.1%. My forecast is for loss in the range of 25,000 jobs and for unemployment to rise to 10.1%.

Although some indicators of economic activity, such as GDP, industrial production and consumer confidence, have shown gains, others such as retail sales and durable goods orders have been soft.

The ADP private survey of employers for January, released Wednesday, indicated job losses consistent with my forecast, but ADP forecasts have proven only a rough indicator of what the Labor Department reports for employment two days later.

Recent soundings of manufacturers by the Institute for Supply Management indicate manufacturing is picking up steam, and more firms are adding employees than shedding them. Inventory data indicated wholesalers are once restocking shelves. Hence we should expect a reduction in manufacturing job losses.

In December and November, 27,000 and 35,000 jobs manufacturing jobs were lost. In January, the number should be much better if things are really looking up at the nation's factories.