Looking Ahead at the Coming Data

What you can expect from reports beginning this Friday.
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O.R. As in, 'Oh, Are They?'

JACKSON HOLE, Wyo. -- Uhh ... now what?

Now we (as always) look ahead to the damn data.

The September employment report to be released Friday.

Some forecasters put the payroll increase at 300k and the average hourly earnings increase at half a percentage point.

And there is no doubt that a print like that would rock Treasuries.

Which brings us to the f-word.

The

Bureau of Labor Statistics

has already cautioned that Floyd is likely to depress average hourly earnings (as well as the average workweek), but the bean counters reckon the rain will have less of an impact on payrolls.

The forecasters at

Salomon Smith Barney

explain why.

Hurricane Floyd hammered the Eastern seaboard during the week of the establishment survey (the week that includes the 12th of the month), but technical factors suggest that it will have little impact on payrolls. In order to be included in the monthly job count, an employee merely needs to show up on a respondent firm's payroll at any point during the reference period -- one does not have to put in a full workweek to be counted. Even in areas that were evacuated and hardest hit by the storm, it is likely that employees worked a portion of the pay period including September 12.

Not that payrolls couldn't print way weak. They certainly could.

Remember January 1996?

Take a

look at what nasty weather did to the payroll number that month: Job growth was cruising at a trend 181k per month when snow came along and smashed it good (and the trader types in the audience will want to note that it

rebounded smartly a month later).

Meanwhile, the unemployment rate jumped two-tenths (and then fell three-tenths in February), the workweek fell to 33.7 hours from 34.3 hours (and then rose to 34.5 hours a month later), and average hourly earnings jumped 6 cents (and then fell 1 cent in February).

The bottom line here is that even if weather renders the September and October employment reports pretty much useless from a true-health-of-hiring standpoint, understanding that labor markets are still fundamentally

tight and knowing your history could make you more than a bit-o-money.

The September retail sales report to be released Oct. 14.

Is this the one?

Is this the month during which that dastardly saving rate -- the one that turned

negative precisely one year ago -- finally catches up with Americans and begins to squash their sinful spending for good?

No. It is not.

And to the Feds who have been squeezing out forecast piles like the one

below for something on the order of three years?

The increase in consumer spending was projected to moderate somewhat from its pace in the fourth quarter of 1996, when it rose 2.9% to a rate generally in line with the expected rise in disposable income.

Put down the pipe already.

The September producer and consumer price indices to be released Oct. 15 and 19.

What would happen if the PPI printed four-tenths overall and five-tenths core (excluding food and energy)? And if the CPI printed three-tenths both overall and core?

No good could come of it (assuming you're long).

And if the estimates of some forecasters prove accurate, we will find out precisely how ungood.

The third-quarter gross domestic product report to be released Oct. 28.

Final demand was growing at a 6.4% (!) year-on-year rate as the second quarter closed. The core

price index for gross domestic purchases

rose 1.2% during the April-May-June period.

The Feds will be looking (and hoping) for materially lower third-quarter numbers in both cases.

The third-quarter employment cost index to be released Oct. 28.

Even if the benefit costs portion of the ECI posts a 1% increase, which would go down as its biggest quarterly gain since the first quarter of 1994, the overall index still looks hard-pressed to rise more than 0.8% (compare to a 1.1% increase during the second quarter).

Why?

Because the wages and salaries portion of the ECI follows average hourly earnings (from the employment report) pretty well, and that series is on track to decelerate notably between the second quarter and the third.

The result?

Right this minute the third-quarter ECI looks to print more bullish than any economic report has in months.

Side Dish

Hey. Let's see if

Lieberman reads the column.

For which game would you most like to see gambling notes?

Purdue-Ohio State.

Georgia-Tennessee.

Miami-Florida State.

Wyoming-Las Vegas.

Michigan-Michigan State.