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This Week’s Economic Roundup

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Feb. 2, 2006--Jobs were scarce in the small-business sector last month, while consumers everywhere kept spending by digging deep into savings. Here's a look at this week's economic developments and how they may impact your business.

Hiring Flat, Wages Up

While wages crept up, new jobs at small businesses remained flat in January, a national survey of payroll data from more than 15,000 employers showed Thursday.

Small employers in every region added few or no new employees in January, with hiring down in the Midwest alone by 0.3%, according to SurePayroll's monthly scorecard.

At the same time, wages grew by 2% to an average $29,697 per year, the survey showed.

Higher wage costs will force owners to lower profitability or raise prices, according to Michael Alter, president of Chicago-based SurePayroll. For now, small businesses seem to have as many workers as they need, he said.

Consumers Spending, but Remain Wary

The mood of consumers continued to improve in January after rebounding late last year in the wake of devastating storms and volatile energy prices, the Conference Board reported Tuesday.

Based on a survey of 5,000 households across the country, the board's monthly consumer confidence index reached a three-year high of 106.3 in January, up from 103.8 in December. Index readings above 100 indicate gains.

"This month's increase was driven solely by consumers' assessment of current economic conditions, especially their more positive view of the of the job market," Lynn Franco, director of the board's Consumer Research Center, said in a statement. About 26.9% of the households surveyed in January said jobs were plentiful -- up from 23.3% in December and the highest level since the 9/11 terrorist attacks, the report showed.

By contrast, the outlook about the future was shaky, the board reported. Its expectations index, which gauges consumer optimism for the next six months, fell to 91.5 for 92.6 in December. More respondents in January felt business conditions would worsen, rising to 10.5% from 9.1%, the report showed.

Still, the brightening mood kept consumers buying cars and other big ticket items in December, whether they could afford to or not, the Commerce Department reported Monday.

While consumer spending rose 0.9% from 0.4% in November, the personal savings rate dropped to 0.7%, knocking the year-end tally to minus 0.5% -- the first negative annual result since the Great Depression, the department said. In 1932, the personal savings rate was minus 0.9%. By comparison, the rate for 2004 was 1.8%.

Meanwhile, prices excluding food and energy in December rose at a slower pace, dropping to 0.1% from 0.2% in November, the report showed.

Productivity Slows

With energy costs climbing again, U.S factories reported slower growth in January, the Institute for Supply Management said Wednesday. Though new orders were coming in, the pace dropped off in January, the report showed.

On Thursday, the Labor Department reported a slowdown in non-farm business productivity in the fourth quarter of 2005, while labor costs had more than doubled from the previous year.

While the housing market also cooled off, construction spending jumped 1% to a record-high $1.16 trillion in December, the Commerce Department reported Wednesday.

Last updated: Feb 2, 2006




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