What to watch

Emerging economic gauge: jobs, auto sales

Wall Street knows U.S. manufacturing is mired in its own private recession. The latest proof came Monday when the Institute for Supply Management’s January manufacturing gauge came in at 48.2, marking the third consecutive month below 50.

A reading below 50 is considered contractionary.

But there are some Wall Street pros who say it doesn’t make sense to use manufacturing as the sole gauge of the U.S. economy’s health. Instead, they argue that in the U.S., where nearly 70% of economic activity is consumer-generated, it makes more sense to gauge the economy’s health via the employment market and auto sales trends.

“The job market is booming,” Ryan Sweet of Moody’s Analytics noted Friday when fourth-quarter growth came in at a weakerthan-expected 0.7%. “With a disconnect between GDP and employment, at this point in the expansion the best barometer of the economy’s health is jobs.”

Steven Ricchiuto, chief economist at Mizuho Securities USA, says investors should be “concentrating ” on the January auto sales report Tuesday. Wall Street estimates that a seasonally adjusted 17.6 million autos were sold, up from 17.2 million in December.

Auto sales are big-ticket items that require buyers to have jobs and sufficient income. “Auto sales have outpaced overall retail sales for the past few years ... ,” Ricchiuto wrote in a report. “A consolidation in the auto industry would increase the risk of a negative GDP print in the first quarter.”