The Street This Week: Alas, Alack, Another Bad Friday?

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Well, if there was indeed a silver lining, or even a pewter one, in Fridayís way-up-to-4.9 percent unemployment report, nobody seemed to have found it over the weekend.

Saturday, Barronís bear-in-residence Alan Abelson saw fit to compare the U.S. economic situation to Japanís, in that housing and consumer spending in that unhappy nation outlasted its stock marketís early-nineties fadeout by a few years — just like itís now doing in the U.S. Then it all went south.

Sunday the politicians stormed the airwaves and started talking about what the New York Timesí news reporters are calling the economyís "recessionary tone" — and what they were going to do about the economy in time for the 2002 midterms. Republicans, feeling the need to be solvers, got the White House to "leave the door open" to a capital-gains or payroll tax cut. Democrats, seeing an opportunity to be complainers, are merely trying to orchestrate Bushís big fall — if the economy goes down with him, well, it's not their fault.

And Monday, seemingly every stock in every time zone outside of Wall Street was down, from three-year lows in Germany to two-decade lows in Japan, although its effect on the domestic front is yet unsure. And the National Association for Business Economics said its panel of economists cut their 2001 GDP growth guess to 1.6 percent from 2.0 percent — and their 2002 number to 2.7 percent from 3.1 percent. But two-thirds of the 31 economists still expect the economy to recover by the end of the year.

Monday morning the Dow was down 60 points before the opening bellís echoes had left the building, but things had reversed themselves by noon despite the exceedingly dour worldwide news. Which raised the possibility that the big selling is over.

For the day.

Economically, itís another crescendo week. Tuesday is empty. Wednesday brings a new accounting of the always-whopping current accounts deficit. Thursday weíre back to unemployment with the weekly initial-claims number, a still-plateauing figure which will probably scare everybody slightly more after last weekís un-scary number left investors so ill-prepared for Fridayís shocker.

So set your selloff sights on Friday, folks, because itís a triple dip of potentially market-shaking reports. Lightest-regarded will be the PPI number, charting inflation at the wholesale level, and potentially thatís a big deal except that itís going to be comfortably low — and inflation looks to be the least of our problems for a long, long time.

Then thereís retail sales for August. Is the consumer still spending — or rather, was he still spending in August? Nobodyís expecting much of a pop, but the flat number that most folks are figuring on could add a notch or two to the general depression level.

And following hard on those consumer-centric heels will be the bi-weekly Michigan consumer sentiment report — this one the preliminary figures for the first half of September — which gets leaked to the press by around 10:15 a.m. Nobodyís expecting a big move either way, but anything of a downward bent is going to result in a lot more chewed-off fingernails hitting the floor — and stock prices with them.

But considering where all that unemployment came from last Friday — manufacturing, which now employs as many workers as it did in 1965 — this Fridayís big report is the sectorís other shoe: industrial production and capacity utilization.

Back to that silver lining. Manufacturing was shedding workers like cat hair in August for a reason — theyíre not producing anything that anybody wants to buy, and slashing payrolls is the only way businesses know right now to tidy up their balance sheets. The other way — the way weíve all been waiting for — is of course to make stuff that people want to buy. That comeback will happen gradually, and unemployment — lagging as it does the actual announcement of layoffs — will continue to rise while it does. But thatís the way this recovery is going to get under way.

It seems an eternity ago now, but just two weeks ago Wall Street was celebrating over a report on manufacturing from the National Association of Purchasing Managers that indicated that new orders were indeed picking up slightly and that the worst might indeed be over. Well, Fridayís report is our first opportunity to have that long-forgotten rally confirmed or disconfirmed.

Simply put, industrial production is how much manufacturers are manufacturing; capacity utilization is how much theyíre manufacturing relative to how much they could manufacture if the buyers were beating down their door. (Itís a fair measure of the times that the number is around 76 percent right now.)

An uptick in either could inspire some longer-view thinking that we sure didnít see on Wall Street during that unemployment selloff — if manufacturing is really on a comeback, then we may infer that some kind of recovery, however it may amble, is on its way. A downtick could make the bears look as smart as they have all summer (and thatís saying a lot): the NAPM report will disappear even further into the mists of out current "recessionary tone" of mind, and any last hopes associated with it will go along for the ride.

Folks, the unemployment report wasnít any reason to panic, and neither will anything hitting the Street this week. The economy will come around eventually — even recessions rarely last more than two years, which is giving George W. Bush, at least, the ability to get to sleep at night without curling up into a ball and sucking his thumb. We are merely paying the price for our irrational boom of a few years back, and this dreary, hopeless feeling — the perfect opposite of the giddy, bulletproof feeling we had while the NASDAQ was printing money — canít last forever.