The ISM Non-Manufacturing report, which covers the service sector, is expected to increase again, from 54.5 to 54.8. Despite remaining in positive territory, the survey had slipped significantly over the past several months before rebounding last month. A further increase would signal that the majority of the economy continues to strengthen.
The international trade balance is expected to shift significantly, with the U.S. trade deficit dropping from $47.1 billion to $41 billion on a decline in exports. Although an improving trade deficit is good news in many ways, in this case, it reflects a substantial decline in consumer goods imports, which ties in closely with weak consumer spending growth—not good news. Goods exports also fell, though by much less than imports, and this is also bad news. As with the manufacturing sector, however, the dollar’s recent reversal should mean this headwind is likely to abate over the next couple of quarters.
Finally, the most important release this week will be the jobs report. Employment growth is expected to decline from 215,000 to 200,000, with the unemployment rate remaining stable at 5 percent. Average hourly earnings are expected to continue to grow at 0.3 percent for the month, in line with the previous month, and the average weekly hours worked to tick back up to 34.5 from 34.4. If expectations are met, this will be another strong report.
Brad McMillan is the chief investment officer at Commonwealth Financial Network, the nation’s largest privately held independent broker/dealer-RIA. He is the primary spokesperson for Commonwealth’s investment divisions. This post originally appeared on The Independent Market Observer, a daily blog authored by McMillan.