May 31: Busy Economic Calendar – Economic Highlights

This week’s busy economic calendar should help resolve the ongoing debate about the U.S. economy’s near-term growth outlook.

While the emphasis in this week’s reports will be on the labor market, we wil also get a read on the nation’s manufacturing sector. Other reports deal with consumer confidence and housing. Given the downshift in market expectations following the soft tone of recent reports, the bar is relatively low for positive surprises. Sentiment will likely get a signficant boost if we get a favorable labor market report.

Europe’s debt problems will remain center stage. Germany has reportedly dropped its insistence on a rescheduling of Greek government bonds, which should pave the way for additional bailout funds for Greece in the coming days. Greece has been effectively shut out of the private capital markets and its privatization program has not produced any results either. A fresh deal with the EU/IMF will be a new lease of life for the Greek economy, which reportedly is running out of liquidity in less than two months. This deal, if it comes through, should help bring down Europe-centric worries in the U.S. market.

On the economic calendar, the most important report is the May non-farm payroll report coming out Friday morning. Ahead of the Friday report, we will get the May ADP report on Wednesday and weekly Jobless Claims numbers on Thursday.

There is no better balm for the economy than a labor market turnaround. Job gains will not only help improve the consumer spending outlook, but will also give a favorable nudge to the beleaguered housing market. Solid job gains in May, along the lines of what we saw in the last few months, should help offset some of the negativity of other economic reports and improve the outlook for the economic recovery.

By most measures, the U.S. economy appears to be on a below-trend growth pace of about 2% in the second quarter. But if the labor market continues to improve, then the growth rate should accelerate in the second half of the year.

Consumer Confidence figures are expected today at 10:00 AM. The index had increased to 65.4 in April from 63.8 in March. The Present Situation Index increased to 39.6 and the Expectations Index increased to 82.6.