More Disappointing Economic News
Several pieces of economic news that won’t be welcome at 1600 Pennsylvania Avenue today have had a negative effect on the market. First, consumer confidence fell sharply in September from August, and the drop is tied directly to job losses. And the Chicago Purchasing Managers’ Index fell sharply in September as well.
The surprisingly poor economic news showed a brief spurt of August hiring by Midwest businesses turned into yet more layoffs in September, while the confidence report's "jobs hard to get gauge" -- seen as a good indicator of labor market trends -- jumped to a nearly 10-year high.
"The Chicago Purchasing Managers' (index) fell off a cliff, It is an ugly report," said Cary Leahey, economist at Deutsche Bank Securities.
Economists fear the current bout of growth may ease once the impact of the recent round of tax cuts starts to fade, with workers still losing jobs nearly two years after the recession ended.
Analysts and investors will look closely at Wednesday's report on national manufacturing from the Institute for Supply Management and the Labor Department's payrolls report on Friday for confirmation of the souring outlook.
"People may be losing their faith in a strong recovery because of the job situation," said Stephen Stanley, senior market economist at RBS Greenwich Capital.
"The lack of improvement in labor market conditions continues to dampen consumers' spirits," said Lynn Franco, director of the Conference Board's Consumer Research Center.
In essence, Bush’s reelection hopes will come down to the Christmas shopping season. If consumer spending, which along with defense spending and foreign financing are the only things propping up this economy goes south at Christmas and falls below expectations, look out.