Economics
Job creation did not get in the Fed’s way of tapering asset purchases. ADP Employment Change beat expectations of 400K private–payroll jobs with a 571K increase – that proved to be a good predictor of October payrolls. Nonfarm Payrolls also beat expectations of 450K with a 531K increase. Private Payrolls grew by 604K (versus 420K expected). The 2–month revision was an addition of 235K jobs. Manufacturing added 60K jobs. The U.S. Unemployment Rate fell from 4.80% to a new pandemic–low 4.60%, and if there’s going to be a large negative effect from vaccine– mandate firings – it hasn’t shown up yet. However, those mandates have recently been suspended by court orders. OSHA was ordered to cease the firing requirements – leading the Biden administration to suspend enforcement. It was interesting that the CDC director refused to answer Senators on the vaccination status of their employees (earlier this month). The Underemployment Rate fell from 8.50% to 8.30% and the Labor Force Participation Rate remained at 61.60%. Challenger Job Cuts showed 71.70% less firings versus October 2020 – also affirming the better payrolls.
Average Hourly Earnings rose .40% in October. That set the year–over–year rate higher by .30% to 4.90% (which matched the University of Michigan survey). Average Weekly Hours fell .1 to 34.7. We’ll insert the CPI adjusted data here for comparison. Considering higher Consumer Prices, Hourly Earnings instead fell by 1.20%. Real Average Weekly Earnings were 1.60% lower. The number of available job positions fell from 10.639 million to 10.438 million in September. As that demand is 2.8 million over those unemployed, job hoppers have leverage and choices. A record 4.4 million workers quit jobs for better opportunities. That ‘quits’ rate at 3% was also a record back to 2000 – when data began.
Initial Jobless Claims have been tame – once again despite vaccine firings that occurred ahead of the court orders that stopped the process for now. Data has also been fairly steady with 4 single digit (albeit in thousands) results over the past 5 week. Claims fell by 12, 2, and 1K over the past 3 weeks to a new pandemic low of 268K. Continuing Claims fell by 138K, rose by 108K, and then fell by 129K over the past 3 weeks to 2.08 million – also a new pandemic low. However, the total number of Americans on government benefits just rose for the first time in 8 weeks – and once again is above 3 million.
Consumer Comfort has risen now for 3 weeks – increasing by 2.8 points to 50.7. The State of the Economy is down a slight .1 over that period. Personal Finances increased by 5.4 to 66.3 – the highest since early October. The Buying Climate improved by 3.2 points to 43.2 – also back near early October levels. Other readings were weaker. University of Michigan Sentiment fell to 11–year lows with a drop from 71.7 to 66.8. Current Conditions fell from 77.7 to 73.2 and Expectations dropped from 67.9 to 62.8. The increase occurred in expectations for inflation – which rose from 4.80% to 4.90% – also a primary reason for downturns in the sentiment surveys. NFIB Small Business Optimism fell from 99.1 to a 7–month low 98.2. A major concern there remains the lack of workers to fill available positions. Economic Optimism (IBD/TIPP) fell from 46.8 to 43.9. Their Economic Outlook survey dropped from 41.3 to 38.5 – each the lowest in many months. The ‘misery index’ is now the highest in decades (Unemployment Rate plus CPI).
Manufacturing is seeing some progress. The Philadelphia Fed Business Outlook rose from 23.8 to 39. Though Kansas City Fed Manufacturing Activity fell from 31 to 24, Empire Manufacturing (New York) also saw a pickup from 19.8 to 30.9. Prices Paid and Prices Received rose appreciably. October’s Leading Index rose .90% after only increasing by .10% in September. The country is recovering from the setback of Hurricane Ida. Factory Production rose 1.2% in October for the sharpest gain in 3 months. Industrial Production rose 1.60% to pre–Covid levels (following September’s 1.30% drop). Capacity Utilization jumped from 75.20% to 76.40%. Q3 Nonfarm Productivity had fallen by 5.00% (the highest drop in 40 years). Q3 Unit Labor Costs were 8.30% higher. September Factory Orders rose .20% and .70% ex transportation. Orders for Durable Goods fell .30% but rose .50% ex transportation. Business Investment (Capital Goods Orders) rose by .80%. The ISM Services Index surged 4.8 to a new high of 66.7.
Consumer Prices rose by a 4–month high .90% in October – taking the annual pace from 5.40% to 6.20% for the largest gain since November 1990. Adjusted for CPI inflation, stock yields are negative. Core CPI (ex food & energy) rose .60% accelerating the annual core pace from 4.00% to 4.60% – the higher since 1991! Food was up 5.3% for the highest pace since January 2009. The Fed’s Mary Daly called the readings “eye–popping,” These were terrible readings for the transitory crowd! Used car prices jumped 9.2% to record highs – with that index rising 38.1% versus last year. Producer Prices rose .60% which left the annual pace at a record 8.60%. Core PPI rose .40% – which also left the annual core pace at 6.80%. Some sectors were rising the most since 1975. In October, Import Prices rose 1.20% – accelerating the annual pace from 9.30% to 10.70%! Export Prices rose 1.50% – which elevated that annual pace from 16.50% to 18.00%! October Vehicle Sales rose from a 12.18 million–unit annual pace to 12.99 million.
Retail Sales surged by 1.70% in October for a 16.3% annual increase. The 1.7% rise was the best since March, and the 3rd straight increase. Ex autos, sales rose 1.70% as well. Products are mostly imported though as the Trade Balance deficit soared from $72.8 billion to a record $80.9 billion. Imports rose by .6% while exports fell by 3.0%. September Business Inventories rose .70%. Wholesale Inventories rose by 1.40% while Trade Sales rose by 1.10%.
Homebuilder Confidence was back on the upswing. The 3–point increase from 80 to 83 set optimism to the highest levels in over 6 months. Home prices are still rising more than double digits in most areas. Austin, Texas saw a 34% annual gain to lead the way. Single–family projects declined as Housing Starts fell .65% to an annual 1.52 million– unit pace in October. Building Permits rose 4.04% to a 1.65 million–unit annual pace.
Monday (11/22) is set for Existing Home Sales for October and the Chicago Fed National Activity Index. Tuesday follows with the Richmond Fed Manufacturing Index. Wednesday is loaded with pre–Thanksgiving offerings including MBA Mortgage Applications (which rose by 5.50% and then fell 2.80% over the past 2 weeks), jobless claims data, the merchandise trade deficit (Advance Goods Trade Balance), an update to Q3 GDP, Durable and Capital Goods Orders, Personal Income & Spending for October, final November University of Michigan confidence readings, New Home Sales, the PCE Deflator, and the minutes from the FOMC meeting that concluded on November 3rd. The following Monday (11/29) brings Pending Home Sales for October and Dallas Fed Manufacturing Activity. Tuesday (11/30) wraps up November with housing prices and Conference Board Consumer Confidence.