NEWS / Foreign Exchange

We expect the employment cost index to ease a bit due to an increase in the economic slack

Employment Cost Index (September, Wednesday 8:30am)

F: 0.8% C: 0.9% P: 0.9%

We expect the employment cost index to ease a bit due to an increase in the economic slack. Our current forecast for the third quarter of 2007 is 0.8 percent, which is slightly below the consensus of 0.96 percent. Currently, most analysts believe that the ECI will be somewhere within the range of 0.8 percent to 1.0 percent. Our forecast is closer to the lower end of the consensus range.

Personal Income (September, Thursday, 8:30 am)

F: 6.4% C: 6.8% P: 6.8%

Personal Income growth rate is expected to be below the long term average for the fourth quarter of 2007. Currently, we expect 0.25 percent growth on a month-to-month basis, which is slightly below the consensus growth rate of 0.3 percent for the month of September. In addition, our current forecast for September is 6.4 percent compared to last year, which shows signs of deceleration. However, personal income remains solid and we believe it will sustain its current level well into 2008.

Pending Home Sales (September, Thursday, 10:00 am)

F: -3.95% C:-6.45% P: -10.7%

The tightening in credit markets continues and the adjustments in the housing sector are far from over. We forecast a reduction of 3.95 percent in the number of pending home sales during September. This reduction follows a 6.45 percent decrease during August. Also, on a year over year basis, the index fell by 21.5 percent, which reflects a significant reduction in the willingness to buy and lower access to credit.

ISM Manufacturing Index (September, Thursday 10:00 am)

F: -0.8% C: -1.7% P: -1.6%

The Philadelphia Fed manufacturing report released last Thursday showed a reduction in the pace of economic growth. The disappointing readings in this regional manufacturing report might be a signal that the apparent health of the manufacturing sector could be temporary. It seems that the current turmoil in financial markets and continued housing troubles may be affecting the broader economy more than many market participants previously expected.

Employment Situation (October, Friday 8:30 am)

F: 80K C: 110K P: 93K

We expect employment to decrease by almost 27 percent, reaching 80K. However, the unemployment rate should be essentially unchanged at 4.7 percent. Non-farm payroll employment is estimated to decrease to 80K down from 110K in September and lower than 93K in August. We expect that health care, food services, and professional and technical services will continue to add jobs to the economy, which is consistent with the pattern observed in the last two months.