The Business Week Ahead

Friday's January employment report will highlight an extraordinarily busy week for economic news. Personal income and outlays on Monday will break out December's consumer share of fourth-quarter GDP followed on Tuesday by Case-Shiller home prices, which are expected to be strong, and consumer confidence where unusual strength is the usual result. The employment cost index comes out only once a quarter and Wednesday's data on the fourth quarter will offer an important clue whether wage inflation is beginning to take hold. Wednesday will also see pending home sales and the latest on the supply-depleted resale market. But the big news on Wednesday will be the FOMC announcement which could offer clues whether policy makers, perhaps raising their assessment of the economy and concerned about the high level of employment, are beginning to think about a fourth rate hike this year. Thursday's highlights start off with the always strong ISM manufacturing report along with construction spending which has been showing solid strength followed late in the day by motor vehicle sales which will offer the first indication on consumer spending in January. This will be followed on Friday by the employment report where solid payroll growth, low unemployment, and moderate wage pressures are the calls.

Monday

Personal Income for December

Consensus Forecast, Month-to-Month Change: 0.3%

Consensus Range: 0.2% to 0.5%

Consumer Spending

Consensus Forecast, Month-to-Month Change: 0.5%

Consensus Range: 0.3% to 0.8%

PCE Price Index

Consensus Forecast, Month-to-Month Change: 0.1%

Consensus Range: 0.1% to 0.3%

PCE Price Index

Consensus Forecast, Year-on-Year Change: 1.7%

Consensus Range: 1.7% to 2.0%

Core PCE Price Index

Consensus Forecast, Month-to-Month Change: 0.2%

Consensus Range: 0.1% to 0.3%

Core PCE Price Index

Consensus Forecast, Year-on-Year Change: 1.6%

Consensus Range: 1.5% to 1.7%

The monthly personal income and outlays report will unbundle December's data from last week's fourth-quarter GDP report. Personal income is seen rising 0.3 percent which would match November's gain while consumer spending is expected to slow only slightly to 0.5 percent vs November's very solid 0.6 percent gain. The PCE price index is expected to inch only 0.1 percent higher for a year-on-year rate of 1.7 percent with the core PCE price index, which excludes both food and energy, seen up 0.2 percent for a yearly 1.6 percent.

Dallas Fed General Activity Index for January

Consensus Forecast: 25.4

Consensus Range: 22.0 to 29.0 

January's consensus for the Dallas Fed general activity index is 25.4 which would compare with December's very robust  29.7. Unsustainable strength is the risk with this sample as new orders keep pouring in, unfilled orders continue to build, and manufacturers in the region, facing long delivery delays and rising work hours as well as elevated prices, may be having trouble keeping up with demand.

Tuesday

Case-Shiller, 20-City Adjusted Index for November

Consensus Forecast, Month-to-Month Change: 0.6%

Consensus Range: 0.4% to 0.7%

Case-Shiller, 20-City Unadjusted Index

Consensus Forecast, Year-on-Year Change: 6.4%

Consensus Range: 6.3% to 6.7%

November's Case-Shiller report is expected to show a solid 0.6 percent gain for the adjusted 20-city index in what would underscore the strength of home-price appreciation which was one of the strongest aspects of the 2017 economy. The consensus for the unadjusted year-on-year rate is 6.4 percent.

Consumer Confidence Index for January

Consensus Forecast: 123.4

Consensus Range: 120.0 to 125.1

Consumer confidence in January is expected to come in at 123.4 and up from December's dip to 122.1 which, however, did not reflect any slowing at all in current conditions or the assessment of the current labor market. This report rose steadily last year to 17-year highs in sharp contrast to the consumer sentiment report which has been flattening out.

Wednesday

ADP, Private Payrolls for January

Consensus Forecast: 195,000

Consensus Range: 160,000 to 234,000

ADP is always hit and miss and December's call unfortunately was definitely a miss, at an accelerating gain of 250,000 for private payroll growth vs an actual 146,000 and a sharply decelerating gain. The consensus for ADP's private payroll call for January is 195,000.

Employment Cost Index for 4th Quarter

Consensus Forecast, Quarter-to-Quarter Change: 0.6%

Consensus Range: 0.4% to 0.9%

Another quarter of emerging wage pressures is the expectation for the fourth-quarter employment cost index where forecasters are calling for a 0.6 percent rise. The ECI jumped 0.7 percent in the third quarter for a year-on-year 2.5 percent, both near the highest rates of the expansion. Pressures in the third-quarter report were evenly split between wages and benefits.

Chicago PMI for January

Consensus Forecast: 64.0

Consensus Range: 60.0 to 68.0 

Enormously strong growth, well in excess of the national economy, was last year's results for the Chicago PMI which surged to end 2017 at a December score of 67.8 (revised 2 tenths higher from the initial reading). This index doesn't have much headroom left as forecasters are calling for easing in January to what is still a very robust 64.0. Readings from this sample, which track both manufacturing and non-manufacturing firms in the Chicago economy, are at or near historic highs in data that go back more than 50 years.

Pending Home Sales Index for December

Consensus Forecast, Month-to-Month Change: 0.4%

Consensus Range: -0.3% to 0.6%

Pending home sales have been doing a good job of tracking final sales of existing homes, jumping in October and then leveling off in November vs what proved to be an actual surge in November and slight dip back in December. The Econoday consensus for December's pending sales index is a useful gain of 0.4 percent.

Federal Funds Target for January 30 & 31 Meeting

Consensus Forecast, Midpoint: 1.375%

Consensus Range: 1.25% to 1.50%

No rate hike is the universal expectation for the January FOMC, the last to be chaired by Janet Yellen. What to watch will be any indications whether strong economic growth and full employment are pushing policy makers toward four rate hikes this year vs the three that are already penciled in. The federal funds target is expected to hold at a midpoint of 1.375 percent inside a range of 1.25 and 1.50 percent.

Thursday

Initial Jobless Claims for January 27 week

Consensus Forecast: 235,000

Consensus Range: 234,000 to 240,000

Initial claims are expected to come in at 235,000 in the January 27 week compared to 233,000 in the January 20 week. Jobless claims have been showing recent volatility yet have been firmly consistent with a low level of layoffs and unusually strong demand for labor.

Nonfarm Productivity, 1st Estimate, 4th Quarter

Consensus Forecast, Annualized Rate: 1.1%

Consensus Range: -0.5% to 2.6%

Unit Labor Costs

Consensus Forecast, Annualized Rate: 0.9%

Consensus Range: -0.1% to 2.2%

Fourth-quarter GDP came in at 2.6 percent which points to a respectable fourth-quarter productivity rate and no more than moderate pressure for labor costs. Forecasters see nonfarm productivity rising 1.1 percent in the fourth quarter vs 3.0 percent in the third quarter with unit labor costs seen up 0.9 percent vs a 0.2 percent third-quarter decline.

PMI Manufacturing for January, Final

Consensus Forecast: 55.5

Consensus Range: 54.2 to 55.5

PMI manufacturing posted a solid 5 tenths increase in the January flash to 55.5 for the best reading in nearly three years. Export sales were a highlight of the flash report as was production, employment and overall orders. The report's sample was trying to build inventories while traction for selling prices was the strongest in more than four years, both tangible signs of strength. The consensus for January's final PMI manufacturing is unchanged from the flash, at 55.5.

ISM Manufacturing Index for January

Consensus Forecast: 58.7

Consensus Range: 57.7 to 60.0

January's consensus for the ISM manufacturing index is 58.7 vs a revised 59.3 in December (59.7 initially reported) when unusual strength across readings -- in stark contrast to the Federal Reserve's "modest" assessment of overall factory activity -- was once again the outcome. New orders, at 69.4, hit a 14-year high in December in results that included unusual strength for export orders, production, backlog orders, and employment.

Construction Spending for December

Consensus Forecast, Month-to-Month Change: 0.5% 

Consensus Range: -0.3% to 0.8%

Construction spending rose a strong and broad-based 0.8 percent in November with December's call at a gain of 0.5 percent. November spending on residential construction rose 1.0 percent led by a 1.9 percent rise for single-family homes in what promises to provide badly needed supply to a depleted market. Home improvements also showed strength, up 0.7 percent in the month, with private nonresidential spending up 0.9 percent.

Total Unit Vehicle Sales for January

Consensus Forecast, Annualized Rate: 17.3 million

Consensus Range: 16.7 to 17.6 million

Domestic-made Unit Vehicle Sales

Consensus Forecast, Annualized Rate: 13.1 million

Consensus Range: 12.9 to 13.7 million

Vehicle sales accelerated in December to a solid 17.8 million annualized rate (17.9 million initially reported) which, outside of hurricane-related spikes in October and September, was among the best results of the last 2 years. January's consensus is for easing strength at a median 17.3 million overall with sales of domestic-made vehicles expected to come in at 13.1 million vs December's 14.0 million.

Friday

Nonfarm Payrolls for January

Consensus Forecast: 176,000

Consensus Range: 150,000 to 205,000

Unemployment Rate

Consensus Forecast: 4.1%

Consensus Range: 4.0% to 4.2%

Private Payrolls 

Consensus Forecast: 172,000

Consensus Range: 142,000 to 200,000

Manufacturing Payrolls 

Consensus Forecast: 18,000

Consensus Range: 5,000 to 22,000

Participation Rate

Consensus Forecast: 62.7%

Consensus Range: 62.6% to 62.7%

Average Hourly Earnings

Consensus Forecast, Month-to-Month Change: 0.3%

Consensus Range: 0.2% to 0.3%

Average Hourly Earnings

Consensus Forecast, Year-on-Year Change: 2.6%

Consensus Range: 2.5% to 2.7%

Average Workweek

Consensus Forecast: 34.5 hours

Consensus Range: 34.4 to 34.5 hours

Econoday's consensus for January growth in nonfarm payrolls is 176,000 in what would compare with a moderate but still favorable 148,000 in December. The unemployment rate is expected to hold unchanged at a 17-year low of 4.1 percent which would continue to point to full employment and the risk of wage inflation which did show some December pressure as average hourly earnings rose 0.3 percent with January's expectations also at a 0.3 percent gain. Year-on-year average hourly earnings increased 1 tenth in December to a still modest 2.5 percent against the January consensus for 2.6 percent. Private payrolls are expected to rise 172,000 with manufacturing payrolls expected to climb 18,000. The workweek is seen unchanged at 34.5 hours and the labor participation rate also seen unchanged at 62.7 percent.

Consumer Sentiment Index, Final January

Consensus Forecast: 95.0

Consensus Range: 94.4 to 96.0

Consumer sentiment continued to edge back in the preliminary January index, to 94.4 in what was the softest showing in six months. Weakness was in the current conditions component which fell more than 4-1/2 points to 109.2 for a 15-month low and what hints at weakness for January consumer spending. Econoday's consensus for the final January consumer sentiment index is 95.0.

Factory Orders for December

Consensus Forecast, Month-to-Month Change: 1.5%

Consensus Range: 0.3% to 2.5%

A 2.9 percent rise in the durable goods report for December makes for a 1.5 percent consensus call for total factory orders which include nondurable goods. Strength in the durables report included vehicles and once again aircraft with weakness centered in a monthly decline for core capital goods orders (nondefense ex-aircraft).