Economic Data on Employment Due
The U.S. economy probably created 175,000 jobs in December and the unemployment rate probably held at 5.4%, capping the best year for hiring since 1999, a government report is expected to show this week.
The December payrolls increase would bring to 2.2 million the number of jobs added last year, generating income growth and helping power consumer spending. Employers added 112,000 jobs in November.
“Job creation likely will continue at a pace that reduces slack and buoys household incomes,” said Robert DiClemente, chief U.S. economist at Citigroup Global Markets, in a report. “Improving labor conditions should provide consumers with sufficient income growth to underpin consumer spending.”
Americans made purchases at the fastest pace in almost three years during the third quarter, prompting companies to draw down inventories to meet demand. Production may strengthen to replenish warehouses and store shelves.
Manufacturing accelerated in December, an industry report is forecast to show today. A reading of 58.5 is forecast for the Institute for Supply Management’s factory index, up from 57.8 in November, according to the median estimate in a Bloomberg News survey. The index has shown expansion, marked by readings above 50, since June 2003.
The institute, based in Tempe, Ariz., surveys more than 400 companies in 20 industries, including clothing, printing, transportation, furniture and plastics.
Orders placed with the nation’s factories may have risen 0.9% in November, almost twice the 0.5% rise in October, a report from the Commerce Department may show Tuesday. Manufacturers probably received more orders for commercial aircraft and for computers and other business equipment.
The economy grew at a 4% annual rate from July through September, with personal spending accounting for nine-tenths of the increase. Inventories subtracted almost a percentage point, the Commerce Department’s numbers showed last month, helping explain why production stayed strong last quarter.
The Labor Department’s employment report Friday is also forecast to show manufacturing jobs rose by 5,000 in December, which would mark the first gain since August. Factory employment in the first 11 months of 2004 rose 76,000, accounting for 4% of the job gains in that period.
Last year probably marked the first annual increase in factory employment since 1997, when 302,000 manufacturing jobs were added. From 1998 through 2003, 3.26 million jobs disappeared from the nation’s factories.
Higher prices for gasoline, heating oil and other forms of energy have eroded workers’ earnings this year. Disposable income, or income after taxes and other payments, increased 2% in the third quarter adjusted for inflation, the latest Commerce Department statistics show. In the same three months of 2003, real disposable income grew at an 8.2% pace.
“Workers face an uphill battle with higher medical costs and higher energy costs,” said Richard Yamarone, chief economist at Argus Research Corp. in New York.
Americans at the end of 2004 were paying 21% more for gasoline than in 2003, and crude oil prices were up 34%. Still, energy prices fell in the last half of the year and lower costs this year are expected to boost real wages.
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The Week Ahead
Today
* Commerce Department reports on construction spending for November.
* Institute for Supply Management releases factory index.
Tuesday
* 109th Congress convenes.
* Commerce Department reports on factory orders for November.
* Major automakers announce December vehicle sales.
Wednesday
* Institute for Supply Management reports on business at services and other non-manufacturing companies.
Thursday
* Labor Department releases weekly jobless claims numbers.
* Freddie Mac reports on mortgage rates.
* The nation’s largest retailers announce their sales figures for December.
* Consumer Electronics Show opens in Las Vegas.
Friday
* Labor Department reports on employment for December.
* Federal Reserve reports on consumer credit for November.
