–Mining and Metal Sectors Hint At Inflation Expectations

By Mark Pender

NEW YORK (MNI) – Very weak hiring expectations among U.S.
non-manufacturers point to a year of flat employment conditions for the
nation, according to the results of the Institute For Supply
Management’s semi-annual report.

“In essence, it’s the jobless recovery everyone’s talking about,”
warns Anthony Nieves who heads the ISM’s non-manufacturing survey.
Nieves along with manufacturing survey chief Norbert Ore talked to MNI
in a telephone interview following the report’s release.

The ISM’s non-manufacturing sample predicts employment in their
sector will rise only 0.3% in 2011, up from a fractional decline in the
prior semi-annual report yet pointing, according to both Nieves and Ore,
to no better than a long run of readings right at 50 for the
non-manufacturing employment index.

Reluctance to add jobs has long been Nieves’s central concern.
“It’s been an anchor on the economic recovery. It would be a brighter
picture without this, but the reluctance won’t stop the recovery. It
just points to slow incremental growth.”

The +0.3% employment prediction suggests that November’s
non-manufacturing employment index, up a sharp 1.8 points to a recovery
best 52.7, may prove to be a head fake.

“November could statistically be a head fake and December for that
matter,” said Norbert Ore referring to the non-manufacturing employment
index. Both Ore and Nieves warn that unusual holiday strength in the
retail sector may be skewing the employment index beyond the report’s
seasonal adjustments. The December employment index will be released in
early January.

Employment expectations on the manufacturing side aren’t much
better, at +1.8% for 2011 vs. +5.2% in the prior survey. Both
manufacturers and non-manufacturers say they will meet increased output
needs by, first, working existing personnel longer.

“It’s doing more with less, the same old thing,” said Nieves.
“Businesses are really holding back on adding to their workforces.”

Manufacturers plan to make aggressive business investments next
year to boost production, forecasting a big 14.5% rise for capital
expenditures.

For employment, Ore warns this may be a negative: “It won’t be for
additional smokestacks. It will be investments in productivity and
technology, areas that could eliminate jobs.”

In contrast to employment, outlooks for sales growth are upbeat.
Non-manufacturers see 2011 sales rising 3.4%, well up from the sample’s
0.2 percent growth of 2010. Manufacturers see their sales rising 5.6%.

Yet Ore warns a portion of these increases reflect expectations for
price gains, not volume gains: “When volumes fall, service providers
will often just charge more.”

A run down of sales expectations shows mining at the top of the
non-manufacturing group with primary metals, fabricated metals and
petroleum products at the very top of the manufacturing group — all
industries that are highly sensitive to price change.

Ore cites stockpiling of precious and base metals as a factor at
play in these expectations, as well as strong global auto production and
overall strength in the global economy.

** Market News International New York Newsroom: 212-669-6430 **

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