If, as we were led to believe, a revolutionary burst of technology has transformed the economy, why is the labor market so tight? Under the thinking of the so-called new paradigm, robots or computer chips were supposed to be doing all the hard labor by now. Americans? They’re supposed to be sitting back, enjoying life. So why are companies crying out for workers? Fresh answers may come forth Friday, with the January employment report. Chicago economist Robert Dederick is looking for it to show joblessness dropping to 4 percent, and the economy adding a robust 240,000 new positions. “The evidence is that the labor market is absolutely boiling over,” said Dederick, a consultant to Northern Trust Co. “There are no signs of any cooling.” He said record high consumer confidence is encouraging job-hoppers, while “the labor market is in overdrive, and the green flag continues to flap for economic expansion.”
ECONOMY
Rate hike ahead
That waving flag is making members of the Federal Reserve see red, as they fret about inflation. Policymakers of the central bank meet Tuesday and Wednesday, amid expectations they will boost short-term lending rates. Chicago banker Kenneth Skopec says Fed members “will kick up rates by a quarter-point,” placing the short-term lending barometer at 5.75 percent. Skopec, of Mid City Financial Corp., said Fed Chairman Alan Greenspan provided a tipoff to the direction of rates last week “when he raised concerns about the level of borrowing by people buying equities.” Skopec said he won’t be surprised if the Fed raises rates by an additional quarter- to half-point over the course of this year.
MANUFACTURING
OVERTIME SURVEY KEY
A list of reports due out includes the January manufacturing survey from the National Association of Purchasing Management on Tuesday; December new home sales Wednesday, January sales of cars and light trucks, also Wednesday, and December leading economic indicators, also Wednesday. Of the group, watch the report from the purchasing managers. For months, their survey has been pointing to factories working overtime. In December, it stood at 56.8; anything above 50 is considered evidence the economy is growing. A stronger-than-expected reading would add to the upward pressures on interest rates.
WALL STREET
DRUG STOCK WATCH
Investors in the stock market have watched prices move flat to lower for January, which could be a bad omen. The month’s trading is considered a traditional barometer of which way Wall Street will go for the year. Chicago investment manager Marshall Front said the market’s direction suggests now is a good time to look at drug stocks. “They are selling at the lowest relative valuations in the last 20 years,” said Front, of Front Barnett Associates. “If the economy slows, due to rising interest rates and rising energy prices, the certain earnings growth of the pharmaceuticals sector will regain attraction for investors’ dollars.”
