World Markets Await U.S. Jobs Report
THIS IS A RUSH TRANSCRIPT.  THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. DEBORAH MARCHINI, CNN ANCHOR: We're looking at a decline in the futures markets and some weakness in the dollar this morning, just a couple of signs that markets the world over are nervous about a report we'll be getting shortly. In just over two hour's time, we find out how the U.S. job market performed in July. In May and June, it wasn't pretty. Job losses like that usually make the economy take a turn for the worst. Peter Viles joins me from the interpreters desk. And, Peter, what do the job figures tell you?</s>PETER VILES, CNN CORRESPONDENT: Well, this is sort of a good news, bad news thing. The bad news is this economy lost 281,000 jobs in the three months ending in June. When that happens, it usually means you're heading into recession. The economy doesn't go in reverse very often, and when it does, it's usually a recession. This economy in job creation was in reverse in April, May and June. But if you look back at the past recessions, I think we have a list of them here, and how many jobs were lost in each one, look at those numbers - 281,000 at the bottom is what we have lost so far. The other four are the four previous recessions, all of them well over a million. That 1980 number, that 1.32 million, that was four months of job losses. We've had 281,000 job losses here in three months. So the pace here is not consistent with past recessions. What is consistent, though, is you just don't get job losses unless the economy has started to move backwards. That's why this is on the list. It's not like we're trying to compare it to recessions out of the blue. There's no other period of job losses in that whole 25-year period other than these five. So, as I say, sort of a good news, bad news thing here in the sense that we are on one of these negative tracks but so far it's a very small one and we have to keep watching it, Deb.</s>MARCHINI: Peter, much has been made here of the fact that most of the job losses have been in manufacturing while the service sector has held up fairly well. Is that significant?</s>VILES: Well, it's significant, though, that the service sector has started to weaken and has now failed to make up for the lost manufacturing jobs. I think your guest, Steve, earlier said he expects maybe 80,000 to 100,000 lost manufacturing jobs in July. That's been the trend -- 785,000 manufacturing jobs lost in the past year. So that's definitely the problem. The question is: Is there any muscle in the service sector to keep the economy going?</s>MARCHINI: All right. Thank you.</s>VILES: Sure.</s>MARCHINI: Peter Viles at our interpreters desk. And my featured guest this morning is Stephen Gallagher, chief U.S. economist at SG Cowen. And what do you think that the markets reaction would be to a weak report? Oftentimes we see the markets rally on weak reports because it means the Fed will cut interest rates,...</s>STEPHEN GALLAGHER, CHIEF U.S. ECONOMIST, SG COWEN: Right.</s>MARCHINI: ... but in this case, we might get scared about the weakness that the economy is showing.</s>GALLAGHER: That's true. I think that -- you know what, what we're really interested in is that we're not looking for a recovery in these jobs numbers. This is going to be a lagging indicator in terms of recovery. What we need to make sure of is that job growth or job losses haven't reached an extent that's going to cripple the consumer because the consumer is all this economy's got in terms of the spending and the spending power in the U.S. and what's kept us out of a recession. So we're - that sort of definitive line is is this job report going to be so weak that the consumer sector is threatened? I don't believe so, but that's what we're going into this report and looking at.</s>MARCHINI: What do you make, though, of reports that we see, maybe anecdotally in some cases, that consumers are doing things like cashing in on home equities and rising home prices in order to support their spending, that they're heavily in debt on credit cards and the like as well? If those are the sources of continued spending, how long will they hold up in the face of a weakening job market?</s>GALLAGHER: I think they can hold up for a long time. I mean the housing prices are fairly firm, the housing market's fairly strong, homeowners are taking some equity out of their houses and putting it into some spending in the malls. Yes, they're doing that, but they're also paying down those credit card bills and that's a very healthy process and that's actually improving the consumer balance sheet. So low interest rates are a factor that are actually improving the consumer sector.</s>MARCHINI: All right. We'll see what else low interest rates might improve when we talk a little bit more later on. Stephen Gallagher, thank you. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com