By Theresa Sheehan

PRINCETON (MNI) – With the Fed’s monetary policy decision out of
the way, attention will turn in the week ahead to the Treasury’s
upcoming refunding announcement for the first quarter 2012 and the
January employment report.

Economic Data

The January 30 week presents a fairly steady flow of economic data
releases, but only a few are likely to grab market attention ahead of
the payroll data.

The January report on the employment situation at 8:30 ET on Friday
will include the annual revision to the establishment survey. Revisions
will push the numbers for 2011 up a bit, but the focus will be on
January 2012 and if there continues to be improvement in private
payrolls. We do not anticipate that the December nonfarm payroll
increase of 200,000 will be replicated in January. We do expect that
when the December/January numbers are averaged, it will show that
payrolls growth is more-or-less on trend at about the 140,000 monthly
average for private payrolls in the third and fourth quarters of 2011.
The unemployment rate will probably remain close to the 8.5% reading in
December.

The ADP National Employment Report for January at 8:15 ET on
Wednesday should signal another increase in private payrolls. The
numbers have registered a fairly substantial miss in the last two
months, but have been consistent with the direction of private payroll
gains and should at least hint at whether markets can expect another
decent reading.

The Challenger report on layoff intentions for January at 7:30 ET
Thursday may show some pick up in the pace of job cuts. No one industry
seems particularly active for the month, but a variety of announcements
could add up to a slight deterioration in what has been a largely
unchanged rate of layoffs intentions in the last three months of 2011.

Initial jobless claims for the week ended January 21 at 8:30 ET on
Thursday should remain on track with an uneven trend slowly downward.
Most of the volatility seen earlier in the month due to a mismatch in
seasonal adjustment and movements in unadjusted claims levels should
have cleared the numbers, and the underlying trends should be more
visible.

The ISM Manufacturing Index for January at 10:00 ET on Wednesday is
expected to reflect the modest expansion shown in the various surveys of
manufacturing from regional purchasing managers and Fed District Banks.
The factory sector is still regaining some upward direction after the
softness seen in the summer months in 2011.

Prior to the release of the national data from the ISM, the Dallas
Fed will release the Texas Manufacturing Outlook at 10:30 ET on Monday,
and the Chicago Purchasing Managers Business Barometer will be released
at 9:45 ET on Tuesday. Data from the New York, Philadelphia, and
Richmond Feds have pointed to a stronger factory sector, and Dallas
should as well. The Chicago PMI has had firm readings for more than two
years, but it includes some non-manufacturing businesses as well as
manufacturing.

The Dallas Fed’s Texas Service Sector Outlook will be reported at
10:30 ET on Tuesday. The Richmond Fed’s survey for services was showed a
slightly slower pace for services, but still expanding. The Dallas
report is likely to be much the same. If so, these suggest that when the
ISM Non-Manufacturing Index for January is released on Friday at 10:00
ET, it will be for another month of modest expansion at the national
level.

New orders for factory goods in December at 10:00 ET on Friday
should take its tone from the solid 3.0% rise in durables orders
reported on January 26. Nondurable orders are likely to reflect
increases in petroleum prices. In combination, this should result in a
fairly strong report at year-end. The durables component was very much
due to gains in nondefense aircraft orders, but there was some strength
in other components.

Available data on earnings for December suggest that increases in
personal income will be modest, while a solid holiday shopping season
and decent car sales point to a rise for personal consumption
expenditures. The numbers for personal income and spending for December
at 8:30 ET on Monday will also include the PCE deflator. This will be
too late for the FOMC meeting to consider, but should show that prices
are continuing to settle to a more comfortable rate of inflation.

The Employment Cost Index for the fourth quarter at 8:30 ET on
Tuesday will probably reflect the sluggish growth in wages and salaries
over the last three months of 2011, but also a sharp rise in benefits
costs driven by further steep increases in medical care.

Preliminary data on productivity and unit labor costs for the
fourth quarter will be out at 8:30 ET on Thursday will reflect the gains
in GDP for nonfarm productivity, and also the limited upward pressure
from unit labor costs.

A scattering of housing data to includes the S&P/Case-Shiller Home
Price Index for November at 9:00 ET on Thursday. The FHFA House Price
Index reported on January 25 indicated that the declines in home values
abated further in the month, and the Case-Shiller measure should tell
much the same story.

Construction spending for December at 10:00 ET on Wednesday should
confirm the increases in residential building already reported, and
provide some fresh information on spending for home repair and
renovation. Public spending on construction will be limited.

The Conference Board’s Consumer Confidence Index for January at
10:00 ET on Tuesday will be the last of the monthly measures of consumer
perceptions about economic conditions. While confidence is not yet back
up to pre-recession levels, the last few months have seen some solid
gains as concerns about the labor market are starting to ease, and the
longer-term outlook improve.

Sales of domestically-produced motor vehicles in January will be
released as available on Wednesday and could hold above the 10 million
unit level for a fourth month. Automakers are maintaining aggressive
discounting and offering incentives to keep inventory moving. The data
on same-store sales comparisons for fiscal January on Thursday will be
the last of fiscal year 2011. Mild weather probably cut into inventory
clearance of winter merchandise, and strong sales in fiscal December may
have borrowed some activity from January. Still, consumers were probably
shopping more than they were in January 2011. These two reports will
give us some sense of how retail sales fared overall in January when
that data is released on Tuesday, February 14.

Not on the calendar, but expected at 14:00 ET on Monday will be the
Fed’s Senior Loan Officer Opinion Survey. The Fed typically publishes
this report on the Monday following its presentation at an FOMC meeting.
Credit conditions probably recovered a bit since the last report was
issued in November which reflected some of the uncertainties in the
economy and financial markets that marked the late summer and early
fall.

Central Bank Activity

There are no announcements on the calendar from major central banks
during the coming week. A few Fed policymakers will be on the public
speaking circuit, and we expect to get some hint as to their respective
views on the probable path of the fed funds rate as expressed in the
FOMC’s collective forecast.

We will be watching for the date for Chairman Ben Bernanke’s
semi-annual monetary policy testimony in February, as well as the Senate
Banking Committee hearings for the two nominees for the Board of
Governors: Jeremy Stein and Jerome Powell.

U.S. Treasury Auctions

The Treasury will announce its quarterly refunding package for the
first quarter 2012 at 9:00 ET on Wednesday with new 3- and 10-year
notes, and 30-year bonds. These will be auctioned on Tuesday-Thursday,
respectively, in the following week. All will settle on Wednesday,
February 15.

The Treasury will release its update to the borrowing requirements
at 15:00 ET on Monday. This will include a preliminary estimate for the
second quarter, an update to the first quarter, and actual amounts for
the fourth quarter 2011.

** Stone & McCarthy Research Associates **

[TOPICS: M$$FI$,M$U$$$,MAUDS$]