Comerica Economic Weekly

Comerica TrapezoisThe August jobs data confirmed the determined grip of the “soft patch” and suggests that we may have to come up with a new name…”the extended soft patch.” Payroll employment was unchanged in August; zero new jobs were created on net.  The headline number was held down by the loss of 47,300 telecom workers, due to the now resolved Verizon strike. However, the separate household survey showed a sizeable increase of 331,000 jobs in August, keeping the unemployment rate steady at 9.1 percent.  Weak earnings and a shorter workweek will add up to constrained income growth for August.  All in all it was a negative employment report made perplexing by the disconnect between the languid payroll survey and the strong gains in the household survey. Light vehicle sales dipped slightly in August to a 12.1 million unit annual rate. Given the collapse of consumer confidence in August and Hurricane Irene coming late in the month, this feels like a bullet dodged. Given the expectation of weak income gains in August, weak job growth in September and a hangover from the hurricane, auto sales may stay parked in September. Worries about a contraction in U.S. manufacturing, spurred by some negative regional Federal Reserve reports, were allayed somewhat by the ISM Manufacturing Report, which showed that overall conditions in the manufacturing sector improved in August. The headline purchasing managers’ index fell slightly from July’s 50.9 to 50.6 in August, still above the break-even 50 mark. Construction spending for July dipped by 1.3 percent but that follows an upwardly revised June number. Overall construction spending remains about even with one year ago. Initial claims for unemployment insurance for the week ending August 27 dipped by 12,000 to hit 409,000. Claims data will be very muddy over the next month due to the combined effects of the now-resolved Verizon strike, end of summer seasonal issues, government cutbacks, and Hurricane Irene and its aftermath. Personal income in July increased by 0.3 percent, in line with consensus expectations. Personal spending gained a strong 0.8 percent, boosted by a 0.7 percent increase in the services component, likely driven by hefty air conditioning bills.

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