12/02 - Weekly Economic Highlights

The market received key updates on the state of the US economy this week; the November employment report was released this morning and indicated that the US economy added 263,000 jobs last month, exceeding the consensus estimate from economists of 200,000. Gains were broad-based across a number of industries, with leisure and hospitality leading the job growth, followed by health care and government (mostly local government), respectively. The unemployment rate was unchanged at 3.7% and the underemployment rate eased to 6.7% in November. A point of interest in the report was the unexpectedly high average hourly earnings jump of 0.6% month-over-month, and 5.1% over the last year, which might have received a boost from severance packages resulting from recent layoffs.

The Fed’s preferred measure of inflation, personal consumption expenditures (PCE), was up 6.0% year-over-year for October and 0.3% month-over-month. Core PCE, which excludes the more volatile food and energy components, increased 5.0% year-over-year and 0.2% month-over-month. Although the pace of inflation is below its recent highs, levels remain well above the Fed’s target of around 2%. Personal income rose 0.7% and personal spending was up 0.8% month-over-month in October.

Consumer Confidence dropped 2 points to 100.2 in November as views of current conditions, the future outlook for the economy, and income expectations declined. The US savings rate dipped to 2.3% in October, the lowest level since 2005, as consumers continue to be squeezed by higher prices and financing rates. Demand for goods and services going into the holiday season was strong as shoppers took advantage of Black Friday and Cyber Monday discounts from retailers looking to move excess inventory.

US Treasury yields dropped this week and the yield curve remains inverted as the market reacted to the slightly softer than expected PCE data and Fed Chair Powell’s dovish comments. At his speech on Wednesday, Fed Chair Powell set the stage for a possible 0.50% rate hike at the December 13-14 Federal Open Market Committee (FOMC) meeting, which would be a deceleration from the 0.75% increases at each of the last four meetings.

Next Week:

Producer Price Index, Durable Goods, ISM Services Index, University of Michigan Sentiment Index.

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© 2022 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. Market risk: the bond market, in general, could decline due to economic conditions, especially during periods of rising interest rates.