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Investing Specialists

Things Looking Up for the Consumer

Much of the economic recovery has been under the surface so far; that's going to change.

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So much of the improvement that economists have seen over the last six months has been nearly invisible to the consumer. Whenever I write of an improving economy, my mailbox inevitably piles up with notes asking just what planet I am living on. Indicators like the purchasing managers' survey from the Institute of Supply Management, export sales, productivity, and inventory levels are not very visible on a day-to-day basis.

Economists, including me, have gotten just a little too excited when an indicator stopped going down so fast. (Only an economist could get excited at job losses of 400,000 instead of 500,000.) Still, many of the less-visible indicators have a good track record, which is why I persist in mentioning them. This week I want to talk a little bit about some more visible data on the consumer.

The number-one issue for consumers is jobs. I think the news on the employment front next week will be very good, with job losses down meaningfully again. We even have an excellent shot at showing job gains by the end of the year. I am expecting job losses of about 160,000 for the month of September, a meaningful improvement from the 217,000 job losses in August and a peak of 741,000 jobs in January. Because there are so many "hidden adjustment factors" to the raw data, anything in the minus 50,000 to the minus 250,000 range would not shock me. Any upside surprise would likely come from quirky seasonal adjustments related to student employment seasonal factors that move out of the employment calculation in September. (The reverse of this factor could have been in play for June when job losses went up after several months of improvement.) A downside surprise could come from commercial construction or newly efficient retailers who seem less likely to add seasonal workers. Whatever the results this particular month, I believe that we could be showing net employment growth by December.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.