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Morici: What to Expect From Friday's Jobs Report

NEW YORK (TheStreet) -- Friday, economists expect the Labor Department to report the economy added 181,000 jobs in January (estimates vary), up from the disappointing 74,000 scored in December. That's about half the pace needed to bring unemployment down to acceptable levels and motivate the Federal Reserve to raise targets for short-term interest rates.

The economy did grow at a solid 3.2% in the fourth quarter. Consumer spending accelerated and growth was more broadly supported by business investment and improvements in exports. The Federal Reserve has well-founded confidence in the long-term stability of the recovery and is well advised to continue tapering purchases of longer-term Treasuries and mortgage-backed securities, I submit. Recent turmoil in currency and stock markets notwithstanding, the fundamentals underneath U.S. equities remain sound.

However, expansion in the housing sectors, autos and manufacturing --the bright stars of the 18-quarter expansion -- showed signs of tiring, and these trends carried over into January data. For example, contracts for sales of new and existing homes and the Institute for Supply Management data for manufacturing have not been encouraging.

The unseasonably cold winter slowed housing sales, which should rebound by March. Autos and other manufacturing activities are troubled by Japan's efforts to suppress the value of the yen against the dollar, and accomplish price competitiveness and exports unjustified by underlying comparative advantages.

The jobs report may reflect continued restructuring among large retailers -- many big names sold large volumes of goods at very thin margins during the holiday season and remain over expanded -- and uncertainty in health care owing to the rocky roll out of Obamacare.

Economists generally believe consumer spending got out ahead of income gains in the fourth quarter, and households will consolidate their finances and slow purchases through the spring. Overall, first-quarter growth in the range of 2% to 2.5%, in line with the trend for the recovery since 2009, is expected and jobs growth in the range of 180,000 for January would support that expectation.

The unemployment rate should stay at about 6.7%, largely because so many adults remain discouraged or stuck in part-time jobs, with the latter condition worsening as Obamacare mandates for full-time employees in 2015 come into more immediate focus.

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