kiplinger connection
The Economy • Transport • Trade

The Economy: Housing is tanking; commercial may follow. And interest rate cuts?
Transport: Where is our public-project money going to go? Think bridges.
Trade: Structural steel is the next big question mark in Chinese imports.

The Economy
Do Aug. job losses signal a recession?
No. At least, not a nationwide slump. The first monthly payroll drop in four years suggests that firms in a range of industries ... not only those directly linked to housing ... are spooked by mortgage and credit market woes. But beyond jobs, other indicators look better.
Most companies see orders expanding. So hiring is sure to rebound as a result.
What readers tell us is mainly upbeat, despite what the job numbers imply. Many firms are feeling pain, no doubt. But a large share are thriving amid the current turmoil.
Still, a dull patch is in the cards, with economic growth through early 2008 hovering in the 1%-2% range. It’ll feel soggy compared with the 2%-3% pace of this quarter.
An interest rate reduction is coming, mainly to help consumers stay in spending mode.
The Federal Reserve will act Sept. 18, reducing the benchmark federal funds rate by as much as half a percentage point.
The general economic trend will mask sharp differences by sector.
Those of you in housing-linked businesses are clearly downbeat. The outlook is dim for lumber suppliers, manufacturers of components for windows and doors, interior designers, landscapers, and surveyors. Same goes for vendors of home appliances, decorative items, and furniture, as well as those selling nonessential items, such as jewelry and boats.
Auto sector managers also have the blues. General Motors' plan to cut production this fall is indicative of the industry's troubles. Autos are 5% of the economy, so a pullback there has wide repercussions.
Commercial builders will take a mild hit as less development of new housing eases demand for adjacent stores, offices, and the like.

But managers in several other industries are seeing robust sales that should provide the bulwark against a more severe economic downturn.
A variety of export-oriented sectors see clear skies ahead: Nuclear technology, especially reactors, boilers, and cooling systems. Electrical machinery. Sound and television equipment. Aircraft. Organic chemicals. Plastics. And a broad range of agricultural goods.
Anything related to energy is gold: Oil and gas production. Coal mining. Utility equipment supply. Energy conservation equipment.
And services are buoyant ... accounting, education, law, etc. Health care continues to boom, providing an underpinning for job growth.

Transport
Urgent bridge repairs will get first dibs on any remaining cash from the federal Highway Trust Fund, which will hit the bottom of its financial barrel in 2008. Congress won’t raise the federal gas tax from 18.4¢ a gallon, leaving funds short of what’s needed for roadwork.
A lot more routine work must wait for the next highway bill, which Congress won’t pass until late 2009. And even that legislation won’t come close to the estimated $1.6 trillion that it would take to upgrade the nation’s infrastructure fully. Expect more toll roads as states turn to the private sector to help stretch highway money.
Getting short shrift: Regular highway maintenance work, road widening projects, and new-road construction to ease congestion.

The feds will hike airline pilots’ mandatory retirement age to 65 from 60. The Federal Aviation Administration is likely to issue a rule later this month allowing one of the two pilots on a commercial flight to be over 60 if the other pilot is under 60.

One reason: Soaring demand for pilots fueled by the brisk growth in global travel as well as on many domestic routes. But ...
The higher age limit isn’t a cure-all. U.S. airlines, especially regional carriers, are already scrambling to fill their cockpits. Besides offering attractive signing bonuses, airlines will help with training expenses, which range from $175,000 to $200,000 per pilot, in exchange for postgraduate work commitments.
Bottom line: Higher operating costs for the airlines, resulting in steeper ticket prices for customers.

Trade
We’re getting word about some shoddy steel imported from China.
The main product involved: Hollow structural sections widely used in construction of skyscrapers, commercial buildings, bridges, and more. This high-strength steel is also common in power lifts, cranes, furniture, and trailer hitches for cars. Imports of this item from China have soared in the past two years, but tests by U.S. and Canadian firms showed flaws.
Chinese high-strength-steel tubes are another problem area. They’re used in power plant boilers and steel scaffolding for buildings.
Imports of these products from China are likely to plummet, to the benefit of Canadian suppliers and some U.S. specialty steel firms: Atlas Tube, Columbia Structural Tubing, Ipsco, Longhorn Tube, and others.