1/5 - Weekly Economic Highlights

Starting off the new year, the December employment report exceeded expectations by adding 216,000 jobs to the US economy, surpassing the consensus forecast of 175,000. Leading sectors in job gains included government (+52,000, primarily from local government positions), leisure and hospitality (+40,000), and healthcare (+38,000). The 3-month running average stood at 165,000, while the national unemployment rate remained unchanged at 3.7%. It's worth noting that the labor force participation rate, which measures the percentage of the working-age population actively seeking employment, decreased from 62.8% to 62.5%, falling well below the pre-pandemic level of 63.3%. Earlier in the week, the market also digested the Job Openings and Labor Turnover Survey (JOLTS), which dipped to 8.79 million in November, compared to an upwardly revised 8.85 million for the previous month. Overall, while the labor market is displaying signs of a gradual slowdown, today's employment report helped alleviate concerns of an impending recession.

Meanwhile, the Institute for Supply Management (ISM) Services Index, which measures the performance of the services sector, declined to 50.6 in December from 52.7 in November. Notably, the employment component of the index plummeted by 7.4 points to 43.3, entering contractionary territory. This decline was primarily driven by increased layoffs and a softening in consumer demand. On the other hand, the ISM Manufacturing Index moved higher to 47.4 due to improved performance as suppliers are better able to meet lower demand levels. New orders declined, and the manufacturing sector continues to show signs of slowing activity on a net basis.

The first week of the New Year witnessed a substantial influx of new issue securities, with approximately $57 billion in investment-grade corporate supply entering the market. Bond yields have risen this week after a period of significant strength leading up to the end of 2023. Currently, the 2-year US Treasury yield stands at 4.38%, the 5-year at 4.00%, and the 10-year yield has improved to 4.03%. Despite these changes, it's important to note that the yield curve, which illustrates the relationship between the yields of various maturities, remains inverted, with a 0.35% spread between 10-year and 2-year Treasuries. In the upcoming week, market participants will shift their attention to inflation releases, such as the Consumer Price Index (CPI) and Producer Price Index (PPI) to gauge if inflationary trends continue to ease. This data, along with other anticipated releases this month, will play a significant role at the Federal Reserve's upcoming meeting on January 31st.

NFIB Small Business Optimism, Consumer Price Index (CPI), Producer Price Index (PPI)

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© 2024 Chandler Asset Management, Inc. An Independent Registered Investment Adviser. Data source: Bloomberg, Federal Reserve, and the US Department of Labor. This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as an indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation, or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest rate, credit, and market risk. Interest rate risk: The value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low-rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk.