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This Week on the Street: The Bleeding Slows

For those of you who received my Investor Brief e-letter on Monday, I wanted to follow up on the key items we were keeping an eye on this week and also mention a couple of other important developments:

  • Auto sales, released on Tuesday, came in at their highest levels in 15 months as 1.26 million consumers bought a new vehicle in August. More than half of that number, 690 thousand, came from the government’s popular cash-for-clunkers program, which provided $3,500 to $4,500 for qualifying trade-ins.

Ford continues to shine among the U.S. automakers.

AP

Its sales rose more than 17% over last year. Both General Motorsand Chryslerreported sales declines from 2008 but did see increases from July.

Subaruand Hyundaienjoyed the biggest sales gains of 51.5% and 47%.

August sales were up nearly 5% from a year ago, but for the year, vehicle sales are down 27%. It’s worth noting, however, that inventory levels are now lower, which may result in fewer incentives for consumers. Most analysts expect a drop-off in sales this month, but there is some debate whether fourth-quarter sales will stagnate or rebound. We’ll continue to watch.

  • Productivity among American workers grew at an annual rate of 6.6% in the second quarter, its highest rate in six years. The final numbers from the Department of Labor were no real surprise as companies continue to operate with fewer employees.
  • Employment seems to be stabilizing, but there are still an awful lot of jobs being lost. The latest unemployment rate, released this morning, jumped to 9.7%, its highest level in 26 years. That number was higher than expected, but the 216,000 jobs lost in August was the lowest in a year. So the bleeding appears to have slowed down, but it hasn’t stopped. A lot of observers believe unemployment will eventually hit 10% before the recovery has kicked in enough for companies to start hiring again.

  • Retail sales
Back to school
Back to school

    in August fell 2.9% from a year ago. Normally, that would be a bad sign, but not in a recession. It was the strongest showing since April and better than the 3.8% decline analysts expected. Discount stores fared better across the board as consumers are still looking for value. With Labor Day coming so late this year, some back-to-school sales may have slipped into September. And the next big test, of course, will be the holiday shopping season right around the corner.

    Factory activityrose in August, and the Institute of Supply Management’s index rose above 50 (to 52.9), signaling an expansion for the first time since January 2008.Here’s an interesting takeon why that isn’t necessarily good news for stocks.

    Federal Reserveofficials apparently believe the recession is ending, according to the minutes from the last Fed meeting three weeks ago. The discussion is already starting to turn to how best to end some of the stimulus projects before inflation becomes a problem. (I talked about this in an exclusive interview with Charles Plosser , President of the Federal Reserve Bank in Philadelphia.)

    Those of you who have signed up for my e-letter , please note that I’ll send out next week’s issue on Tuesday, after the Labor Day holiday. I’ll be in touch with an interesting look at Steve Jobs, insights from the Ambrosetti conference in Italy, and of course, the key items to watch next week on the street.

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    Questions? Comments? Write toinvestoragenda@cnbc.com

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