Horner: March Unemployment Data Expected to be 'Very Strong'
DAVID HAFFENREFFER, CNN ANCHOR: The key economic report of the week, the March unemployment data, is released a little bit later on today.</s>DEBORAH MARCHINI, CNN ANCHOR: For another preview of the report and its effect on the Federal Reserve, we have with us senior financial strategist David Horner of Merrill Lynch, a frequent contributor to this program. And David, there is the school of thought that says the report almost doesn't matter, the Fed is going to raise rates regardless of what it says.</s>DAVID HORNER, MERRILL LYNCH: Well, I think the Fed will raise rates until it's convinced that the economy going forward will slow enough to unwind some of what they feel are the building inflationary pressures from the very, very tight labor market. So, the report does matter to the Fed. But, your Christine Romans, who was on previously, said that she doesn't think the report will matter that much. And I, basically, agree with that. The market -- the attention of the markets has really, really turned to the stock market. And I mean, bond market traders watch it, everything. And that diminishes the importance of these reports. The other thing is that we've gotten so used to strong data, that, OK, it's just another strong report. But we do expect a very strong report.</s>HAFFENREFFER: Everywhere you look these days there are "Help Wanted" signs, store fronts and what not. How long can we remain at a such low employment -- unemployment rate without that pushing wages much higher?</s>HORNER: Well, you know, most forecasters, myself included and certainly Governor Meyer of the Fed, would have said: We've already passed that point. And, so, people are -- I mean, we have right now rising real wages of about three and a half percent, and productivity is rising at about that level on a year over year. So, there really isn't a lot of inflationary pressure coming from labor, despite the tightening labor market. And frankly, that's a tad of a mystery to economists. Will we see those pressures in the future? Well, Greenspan, in his recent pronouncements, his -- at his hearings or his speeches, has suggested we probably will, or at least that's what the risk is. And I agree with that. But it certainly hasn't shown up yet.</s>MARCHINI: There's a school of thought that says that one of the reasons productivity is growing and wages are not necessarily being increased is that the productivity is coming from all of us working longer hours. What do you make of that assessment? And do you think we're going to see it again in a longer week?</s>HORNER: Well, I do think Americans, especially colored with other nations, work an awful lot, but that is factored in to the numbers. No, I think the productivity is coming from several factors. One, the baby boomers, your biggest segment of the working population, are the most productive -- they're in their most productive years, and we do have a lot of technological improvement. And the biggest single factor is that, unlike in the past, the service sector is enjoying great productivity gains. Historically, your productivity gains have come in the manufacturing sector. But now, we're hard -- what we call "hard-wiring" the skills of service workers. I mean -- I'm a service worker in financial industry. A person at McDonald's is a service worker. But we now have computers; we can punch hamburgers on our cash registers; doctors have all kinds of machines that can enhance their service productivity. And that's where some of the big gains are coming.</s>HAFFENREFFER: People's expectations for this report, at least for the jobs created number, the big headline number that everybody looks at, seem to be all over the map, from the high 300,000s, all the way up into the mid 500,000s. You seem to be smacked out in the middle with 425.</s>HORNER: We are a little on the high side with -- I think that's a little above the consensus. But...</s>HAFFENREFFER: How come?</s>HORNER: Well, you know, we think that it's going to be 165 census workers, but it's a bit of a grab bag. I mean, the consensus is, what, 375 to 400; we are at 425, as you say; that's kind of near the middle. There's somebody at 500. Nobody really knows, to be quite honest. But everybody, I think, feels that it is likely to be a strong report.</s>MARCHINI: Yes, no sign the economy is slowing down, at least not here. David Horner of Merrill Lynch is sticking around. He's going to be back with us next half hour. Search CNN.com CNNSI.com CNNmoney.com The Web