Chicago Tribune

Viewed from the perspective of the Midwest, the nation’s job market appears less than robust. Last week’s announcement by Ford Motor Co. that it soon will bid farewell to 30,000 jobs and 14 factories was the latest in a long series of cutbacks by manufacturers who make everything from appliances to zippers.

Taking a wider perspective, many economists say the nation is at full employment. The downfall of the industrial sector, by this view, is a natural phenomenon as companies move work to Asia to take advantage of a huge, low-cost work force.

More clues about the situation arrive Friday, with the employment report for January. Economist Scott Anderson is looking for the jobless rate to hold steady at 4.9 percent, while payrolls grow by 280,000 positions, up from a lukewarm 108,000 in December.

The big surprise in the latest economic news is that businesses aren’t spending heavily on new equipment, said Anderson, of Wells Fargo & Co. in Minneapolis.

“Real gross domestic product grew at a meager 1.1 percent rate in the fourth quarter, the worst performance in nearly three years,” he said. “Dismal business fixed investment was up only 2.8 percent, at an annual rate.”

That doesn’t augur well for the job picture, because, according to Anderson, “a stumbling housing market, a slower consumer, worsening credit quality and a decelerating labor market are just a few of the primary side effects that could emerge,” as the Federal Reserve continues to tighten interest rates.

Speaking of the Fed, analysts are nearly unanimous that Tuesday’s meeting of the central bank’s policy-makers will result in another hike in short-term interest rates. That would be the 14th tightening step in about 19 months, and would bring the overnight lending rate to 4.5 percent.

Chicago investment manager William Hummer says Tuesday’s rate hike, which will occur as Fed Chairman Alan Greenspan bids farewell, is “baked into the cake, and another boost is likely in late March.”

After that, the outlook is about 50-50 for a further hike, which would bring the short-term barometer to 5 percent by May, said Hummer, of Wayne Hummer Investments.

“That’s a long time away, and it’s not certain that members of the Fed would want to push the rate higher than 5 percent,” he said. “That level would bring the prime lending rate to 8 percent, and that may be their limit.”

The stock market has stuttered a bit over the last 10 days on so-so news about the housing market and a few earnings shortfalls. But solid gains greeted solid profit reports from several corporate behemoths on Friday.

So far, the greatest concern was expressed after several large banks said results were crimped because of unexpectedly high credit card defaults by consumers.

Investors will be watching in days ahead to see if there are additional signs of economic slowing, which could cloud expectations that 2006 earnings will grow at double-digit rates.