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INSIDE CI: Knock on Wood

January 1, 2008
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The monthly roundup from Editor-in-Chief Susan Sutton.

I hate to admit it, but I'm pretty superstitious. The neighbor's black cat makes me nervous, I want to stay in bed whenever the 13th of a given month falls on a Friday, and I never pick up pennies from the sidewalk because I can't remember if they should be heads or tails up for good luck.

Superstitions can provide us with a feeling of control: if A occurs, then B will surely follow. They enable us to predict future events and provide a semblance of structure to our lives, which we could certainly use these days. Our world seems more uncertain than ever. The effects of the sub-prime mortgage crisis are being felt well beyond the consumers and lenders involved. In fact, the ripples are reaching even beyond the U.S. as foreign investment banks are recording record losses. The ongoing domestic housing slump, coupled with increasing and unstable oil prices, has many economists whispering recession.

Manufacturers do have cause for some optimism, however. According to the U.S. Census Bureau, new orders for manufactured goods in October 2007 (the most recent data available at press time) increased by $2.3 billion, or 0.5%, to $423.5 billion, following a 0.3% increase in September. Unfilled orders increased by $7.7 billion (1.0%) to $779.5 billion, their highest level since the series was first stated on a North American Industry Classification System (NAICS) basis in 1992, and followed a 1.1% September increase.

Employment statistics from the U.S. Bureau of Labor Statistics provide a mixed view. Non-farm payroll employment continued to increase in November 2007 (94,000), and the unemployment rate was unchanged at 4.7%. Professional and technical services employment was up by 24,000 for the month, reflecting growth in computer systems design and in management and technical consulting.

Employment in manufacturing continued its downward trend for November, however (-11,000). Job losses continued in two industries closely tied to housing: nonmetallic mineral products (such as concrete and glass) and wood products. In contrast, machinery manufacturing continued to add jobs (4000). The employment-population ratio rose by 0.3% to 63%, but this is down from its most recent peak of 63.4% in December 2006.

As I write this column, the Federal Reserve is expected to announce another interest rate cut. According to Martin Crutsinger, Associated Press economics writer, "many analysts believe the current quarter and the early part of next year will represent the period of maximum danger for a possible recession. 'I think a full-blown recession can be avoided, but just barely,' said David Jones, chief economist at DMJ Advisors. He predicted that the Fed will follow up its expected December rate cut with three more reductions at its first three meetings of 2008."

In 2008, CI will continue to provide you with the information and services you need to succeed. I wish we could throw a little salt over our shoulder and make all the bad economic luck go away. Knock on wood, those rate cuts will do the trick.  

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