Chicago Tribune

The nation’s job market has become heavily dependent on two key sectors, namely construction and retailing. For the economy to remain vibrant, and payrolls to expand, Americans most be willing to rush out to acquire new homes and shell out cash to stock up on household items.

Unfortunately, some measures of housing have hit a six-month low, and consumers, hit by $3-plus prices for gasoline, are displaying signs of exhaustion when it comes to travels to the discount store.

That creates questions about whether hiring will continue, and at what pace. Expect Friday’s July employment report to show joblessness flat, at 4.6 percent, with modest payroll growth of 140,000 positions. That’s the prediction of Chicago economist William Hummer.

“The Federal Reserve is seeing its objectives being fulfilled, because the economy is starting to slow,” said Hummer, of Wayne Hummer Investments.

After expanding earlier this year at a rate exceeding 5½ percent, the next six months will see growth below 3 percent, he said.

“The economy is losing momentum, but that doesn’t mean there will be a downturn,” Hummer added. “Things still look solid for the year’s second half.”

Meanwhile, analysts see less than a 30 percent chance that the Fed will raise rates when policymakers meet Aug. 8.

Stocks slow

The stock market has been staggered in recent days by earnings shortfalls involving two of its darlings, United Parcel Service and Norfolk Southern. The result was a devastating drop in the Dow Jones transportation index, which fell more than 13 percent to five-month lows.

Investment adviser Dick Evans says the drop in railroads and trucking companies offers a warning sign for investors. “If the Dow industrials were to hit a new high, but transportation stocks fail to follow, there isn’t much room for a big move on the upside,” he said. “Don’t mortgage the house on this rally.”

Auto sales down

Expect glum faces in Detroit on Tuesday, when automakers report car and light truck sales for July. Analysts are looking for a dramatic drop from year-earlier figures, perhaps a decline of 12 percent or more.

– Chicago Tribune

The problem is that in 2005, automakers stoked up midsummer sales with heavy discounting, notably promotions pledging employee pricing for everyone. Currently, price breaks are fewer, at a time when sky-high gas prices are prompting buyers to seek out fuel-efficient models.