The Street This Week: On the Jobs

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Goodbye second quarter, and good riddance.

Oh, the earnings tide isnít quite at full ebb yet, with a smattering of companies still waiting to tell Wall Street how bad things have been lately and how much better or worse theyíre going to get. Among them: some telecom (Verizon), some energy (Williams, PG&E, Aon, Royal Dutch Petroleum), some grub (Tyson, Wendyís, Del Monte Foods), some health care (Humana, Cardinal Health) and some tech (Scient, Applied Microsystems, Thursday, the 23rd San Francisco Money Show opens by the Bay, and Logitech International — remember when everybody was doing this? — splits its stock at 10-to-1.

(That bit of dot-com nostalgia, however, pales in comparison to last weekís dose, in which JDS Uniphase, highest-flying of the tech-infrastructure high-flyers, reported that it had lost about $50 billion in Q2. As the NYT editorial page was stirred to note Sunday, that "may be the biggest loss in corporate history.")

And then there was Fridayís report that growth for April-May-June was a pale 0.7 percent, which could have been worse — it could have been negative 0.7 percent, the official signal of a recession — but it sure as hell could have been better. Not only are corporate earnings glum and corporate profits glummer, corporate spending — the capital investment that makes the economy grow sustainably — was non-existent.

So we can close the books on that ugly chapter.

Whither the third? Well, once upon a time, Q3 was supposed to be the start of the turnaround; now itís just another three months to wonder if this gets worse before it gets better. That brings us back to the consumer — who, according to Fridayís University of Michigan survey, is getting a little glum too — and whether $40 billion in rebates and 275 basis points in interest-rate cuts will be enough to keep wallets open and the economy above water.

And that brings us back to the job market. The weekís spate of economic reports culminates with the number everybodyís afraid of — July unemployment — and makes a few consumer-related stops along the way. Tuesday brings personal income for June and Consumer Confidence for July (and the Chicago Purchasing Managers Index for July, whichíll be bad news for manufacturing, but you knew that). Wednesday gives us auto and truck sales for July, and construction spending for June and National Association Purchasing Managers for July (see CPMI, above). Thursday sets the table with weekly Initial Unemployment Claims and a new four-week rolling average to chew our nails over. And Friday brings it all back home with Julyís non-farm payrolls, hourly earnings, and average workweek — and the headliner, which is expected to tick up once again to 4.6 percent.

One more time: Thatís historically low, and no reason to panic. But itís still getting higher, which means that every 0.1 percent uptick is another hole in the consumer-confidence dyke. The stream of announced layoffs from the corporate sphere hasnít let up appreciably, and some Wall Streeters expect a whole new round of payroll cuts when upper management gets back from summer vacation.

Where Wall Street Is At

The next Fed meeting is August 21. Most investors duly noted during Alan Greenspanís congressional testimony that Greenspan feels hope for the economy to start picking up over the next few quarters; now, in the light of the Q2 number, will be the time to contemplate just what he meant by "period of sub-par growth" and "stabilize at a lower level." If consumers retrench, that period could be very sub-par indeed; if they donít, well, itís not going to get much better than 0.7 for quite a while. New Fed betting is on a quarter-point cut (at least) in August and more after that.

Whatís it all mean for stock prices? Probably not too much. Last week Wall Street spent a few days grasping at a rally (you know times are hard when PeopleSoft is a market-moving bellwether) and the rest of the week selling it off. (In the end, the Dow lost 150 points for the week; the NASDAQ broke about even.) The equities slingers are bouncing along the bottom and crying "summer rally" with every jolt, and hey — if they will it, it will come. But if it does, it wonít stay long, not without anything resembling profits or even incipient demand pushing up on the charts. Look for some bumps — as the last of the earnings trickle out, Wall Streetís 9-to-5ers gotta trade on something — and a lot of grind.