Latest Economic News Mixed, Consumers Upbeat
December 07, 2001
The latest economic news is better in some areas and worse in others, while consumers don’t seem to be that worried about the state of the economy.
The federal government Friday morning reported employment in the United States lost 331,000 jobs in November, bringing the two month loss to 799,000 and pushing the unemployment rate to 5.7%, the highest rate in six years. Most analysts believe the news will push the Federal Reserve to cut interest rates again when it meets next week.
163,000 more manufacturing jobs were lost. This is a 1% decline that is about half due to still-rising productivity. The second half is due to lower sales or the use of inventory to meet orders; this will subside soon.
166,000 service jobs were lost in this usually stable sector of the economy. This included 45,000 in air transportation, 25,000 in amusement/recreation and 82,000 at personnel supply services. The September 11 effect is still being felt.
Nonetheless, the total payroll was 0.2% higher in November than in September. Many of the jobs that ended were part-time or low wage. Consumer spending and freight cannot drop more than marginally as long as payrolls are rising.
Meantime, a key gauge of U.S. consumer sentiment bounced higher in early December. The University of Michigan's closely-watched consumer sentiment index rose for a third straight month to 85.8 in early December from 83.9 in November.
This index is driven by the current financial situation of those interviewed. It suggests that the fear of layoff has not spread to most consumers.
On Thursday, the U.S. Commerce Department reported factory orders posted an unexpectedly sharp gain for October, the largest rise in almost a year and a half, posting a 7.1% in October to a seasonally adjusted $333.19 billion. This is the biggest gain since June of last year; it followed a 6.5 percent decline in orders seen in September.
Non-durable goods manufacturing, mostly consumer packaged goods, experienced a 0.9% rise in October shipments. Shipments had fallen 3.2% in September. This is a nearly complete rebound considering the rapid plunge in oil prices and deepening price declines for paper, plastic, chemicals and food. Freight volume for packaged goods in October was probably almost back to the August level. The first retail reports for November suggest a small shipments and freight gain over October.
Manufacturers' inventories of non-durable goods dropped 0.5% in October, the same decline as in the previous two months. The October inventory/sales ratio was slightly below the ratio in both September 2001 and October 2000, so manufacturers are now operating production lines to match expected sales.