October 7, 2008--The employment situation continued its deterioration in September as payrolls declined by the thousands. Consumer confidence was up slightly, on the heels of increased expectations for the future. Manufacturing was weak in September; the ISM fell below the threshold for expansion. Weak manufacturing news was also evident in the factory orders report, as all components decreased in August's report.

 

Employment Situation
The unemployment rate remained steady at 6.1% in September. Nonfarm payrolls declined by 159 thousand in September. Revisions made to the previous two months' figures effectively cancelled one another out. The economy has lost 760 thousand jobs in 2008. The average workweek contracted to 33.6 hours and average hourly earnings increased to $18.17 in September. Last month, average hourly earnings stood at $18.14. Weekly unemployment claims are still weak and deteriorating, so the problems in the labor market will be with us for the foreseeable future.

 

Consumer Confidence
Consumer Confidence increased modestly in September, rising 1.4 points to 59.8. In August, the index stood at 58.5, an upward revision from the originally-reported 56.9. The leading components of the survey showed mixed feelings about the economy. Consumers' expectations for the future surged, rising 6.4 points to 60.5. However, people remained concerned about their current economic conditions, as the present situation index fell to 58.8 from 65. Moreover, consumers remain worried about labor market conditions, as those that believed jobs were plentiful decreased to 12.2%, the lowest reading since October 2003. Looking forward, Consumer Confidence will likely fall as the effects of the latest financial meltdown will begin to appear on subsequent reports.

 

ISM Survey
The Institute for Supply Management (ISM) manufacturing survey plummeted 6.4 points to 43.5 in September and now stands at its lowest point since 2001. Previously, it hovered around the threshold for expansion of 50 during the summer months. The latest survey, though, may be overstating manufacturing weakness as recent hurricanes in the Gulf of Mexico and a continuing strike at Boeing have interrupted production during September. With such a large decline, the Fed may see it as an opening to cut rates if it feels inflation is under control. Looking ahead, manufacturing should remain sluggish as consumers, governments, and businesses pull back on spending in reaction to the financial crisis.

 

Factory Orders
New orders for manufactured goods fell 4% in August after increasing 0.7% in July. Orders for durable goods were off 4.8% and nondurable goods orders, which equal shipments, decreased 3.3%. Orders for core capital goods, which are a proxy for business investment spending, increased at a rate of 2.4% for the month. Unfilled orders also grew at a rate of 0.4%, down from 0.8% in July.

Given the urgent challenges confronting the American economy, why do I want to devote today's column to protecting intellectual property (IP) and preventing IP theft, counterfeiting, and piracy? Because America's ability to compete in the global economy and create 21st century jobs for our children and grandchildren depend on our ability to lead the world in innovation. And the key to innovation is intellectual property.