Economic data continues to point to a strong, albeit cooling, labor market and stable economic growth.
This week, the Nonfarm Payrolls Report (NFP) improved dramatically from the dismal report in October. The economy created 227,000 new jobs in November, rising from the upwardly revised 36,000 created in October. The Gulf and East Coast dockworkers strike along with Boeing’s union machinists strike were both resolved which contributed to the NFP recovery in November. However, the temporary distortions in the wake of Hurricane Helene and Hurricane Milton may continue to affect labor market data in the near-term.
Aside from the surge in the NFP report, the remaining employment data was mixed. The Unemployment Rate ticked up to 4.2% on the heels of a slight decrease in the Labor Force Participation Rate. Meanwhile, Initial Jobless Claims increased marginally for the week with 224,000 new claims, and Continuing Claims came in slightly lower, at 1,871,000, than the revised 1,896,000 from the prior week. The Job Openings and Labor Turnover Survey (JOLTS) report indicated 7,744,000 new job openings in October which represented an increase from the downwardly revised 7,372,000 job openings in September. The labor market data continue to trend in-line with our view at Chandler for a normalizing labor market.
On Wednesday, the Federal Reserve released the Beige Book summarizing economic activity for each of its 12 districts for November. Overall economic activity increased slightly in most districts, the labor market remained strong and generally unchanged, while wage growth increased moderately. Two themes across the regions worth noting were concerns over a significant rise in the cost of insurance premiums, and concerns over the prospect of tariffs causing inflationary pressures.
The Institute of Supply Management (ISM) Manufacturing Index indicated contraction for the eighth consecutive month in November coming in at 48.4% on Monday. Although still in contraction territory, the Manufacturing Index was 1.9% higher than the 46.5% reported in October. Reiterating stable growth, the ISM Services Index presented the fifth straight month of expansion at 52.1%. For both measures, a result above 50% corresponds with the economy generally expanding, whereas below 50% corresponds with contraction.
Heading into the holiday season, consumer sentiment appears to be improving according to the University of Michigan Consumer Sentiment Survey. The December preliminary estimate came in at 74.0 versus the November result of 71.8. A slight uptick in Average Hourly Earnings for November perhaps helped boost consumer sentiment.
Treasury yields were modestly lower this week as the 2-year US Treasury Note decreased 6 basis points to 4.09%, the 5-year decreased 1 basis point to 4.04%, and the 10-year decreased 2 basis points to 4.16% as of writing. The 2-year/10-year yield curve remained in positive territory at +6.7 basis points.
Next week: Wholesale Inventories & Trade Sales, Nonfarm Productivity, Consumer Price Index (CPI), Real Average Hourly & Weekly Earnings, Federal Budget Balance, Producers Price Index (PPI), Household Change in Net Worth, Import/Export Price Index
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