Commenting on the implications of the worsening employment situation for the US consumer, Mark Vitner (Wachovia Economics Group) said credit availability and housing affordability were 2 important elements of consumer buying decisions, but that an even more important variable was consumers’ comfort about their own employment and income prospects.

“Consumers typically have to have a job if they are going to buy a home or automobile. And even if consumers have a job, they are less likely to borrow and spend if they feel their job is at risk or their income could take a hit,” said Vitner.

Elsewhere in the world, major economies remain mired in a severe slump. “Europe, Germany, France, and the UK all reported declines in indexes of purchasing managers in December,” said Asha Bangalore (Northern Trust). "China’s factory sector has contracted for the fifth month running according to the CLSA China Purchasing Managers’ Index. ... the Australian ... Manufacturing Index has recorded readings below 50 for seven consecutive months ... In sum, weak economic conditions across the world is a challenge for policy makers in the months ahead.”


Click to enlarge
Source: US Global Investors – Weekly Investor Alert, January 2, 2009.

Assessing the global economic outlook, Nouriel Roubini (RGE Monitor) posed the following questions on RealClearMarkets:

“So what lies ahead in 2009? Is the worst behind us or ahead of us?

“The United States will certainly experience its worst recession in decades, a deep and protracted contraction lasting about 24 months through the end of 2009. Moreover, the entire global economy will contract. There will be recession in the Eurozone, the UK, Continental Europe, Canada, Japan, and the other advanced economies. There is also a risk of a hard landing for emerging-market economies, as trade, financial and currency links transmit real and financial shocks to them,” said Roubini.

Week’s Economic Reports

Click here for the week’s economy in pictures, courtesy of Jake of EconomPic Data.


Click to enlarge
Source: Yahoo Finance, January 2, 2009.

In addition to the Federal Open Market Committee (FOMC) releasing the minutes of its December 16th meeting (Tuesday, January 6th) and the Bank of England’s interest rate announcement (Thursday, January 8th), the US economic highlights for the next week, courtesy of Northern Trust, include the following:

1. Employment Situation (January 9th): Payroll employment is predicted to have dropped by 450,000 in December after a loss of 533,000 jobs in the prior month. The unemployment rate is expected to have risen to 7.0% during December from 6.7% in November. Consensus: Payrolls: -478,000 versus -533,000 in November; unemployment rate: 7.0% versus 6.7% in November.

2. Other reports: Consumer Confidence (December 30th), Construction Spending, Auto Sales (January 5th), Factory Orders, ISM Non-manufacturing, Pending Home Sales Index (January 6th).

Markets

The performance chart obtained from the Wall Street Journal Online shows how different global markets performed during the past week.


Click to enlarge
Source: Wall Street Journal Online, January 2, 2009.

Good riddance to 2008! Let’s hope that after one of the most tumultuous years in history, conditions will calm down - as always happens after a storm. And may this compilation of news items and words from the investment wise assist in keeping our portfolios on a profitable course.

Here’s wishing you a blessed and calm 2009!