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We expect the unemployment rate to climb by 0.2pp, to 6.3 percent, which would match the peak reached after the 2001 recession. In contrast, we expect average hourly earnings growth to rebound slightly, to 0.3 percent month-over-month from 0.2 percent in the previous month. The sharp increase in inflation over the past year has eroded workers' real wages and aided the adjustment process in the labor market. Nominal wage growth therefore may have less need to slow in the current cycle. Elsewhere in the report, we look for average hourly earnings to hold at 33.6 hours and for the aggregate hours index to decline by 0.2 percent month-over-month. The latter would imply a 2.8 percent decline in aggregate hours over the three months ending in October.
Pending home sales have been very volatile over the past several months — a trend we expect to continue in August. We expect pending home sales to fall 2.5 percent in September, following a 7.4 percent increase in August. Looking past the volatility, the trend in pending home sales has been higher, with sales up nearly 9 percent year-over-year in August. The increase in home sales has been driven by an increase in foreclosure sales, which have contributed to deep discounting. However, the dislocation of capital markets and deteriorating economic outlook could stall the recovery in sales.
Wholesale inventories are likely to rise by 0.4 percent month-over-month in September. As with the release of manufacturing inventories in the factory orders report, we would look for any differences between actual inventories and those implicit in the BEA's advance estimate of 3Q GDP growth.
We expect consumer installment credit to fall $2 billion in September, following a sharp $7.9 billion decline in August. Similar to August, non-revolving credit — which is largely auto loans — should post the biggest decline. This reflects both the plunge in demand for auto sales and the reduction in credit supply. Revolving credit is likely to fare better and experience little change. Although consumption has declined, consumers have become increasingly dependent on credit cards to finance spending.
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