Positives
1)Payrolls in November expanded by 263k, 63k more than anticipated, partly offset by a downward revision to the two prior months of 23k. Most of the beat was in the government sector as private payrolls rose by 221k, 36k above the estimate. Smoothing out the monthly noise puts the 3 month job hiring average at 272k vs the 6 month average of 323k, the 12 month average of 408k and vs the 2021 average of 562k. Average hourly earnings rose .6% m/o/m, double the estimate and October was revised up by one tenth to a gain of .5%. It was up 5.1% y/o/y and that has been the trend for most of this year and double the pace seen in the 20 years leading into Covid.
2)Within the ADP report, those leaving their job for better opportunities saw a 15.1% y/o/y wage increase. For those ‘stayers,’ pay rose by 7.6% led by leisure/hospitality. ADP said “Pay growth remained elevated even as it continued a modest but broad based deceleration.”
3)Initial jobless claims for the week ended November 26th totaled 225k, 10k below expectations and after last week’s 241k print (revised up by 1k). Keep in mind that the Thanksgiving holiday likely distorted this figure. The 4 week average was 229k, near a 3 month high.
4)Apartment List reported its National Rent report covering November and its index fell by 1% m/o/m, “marking the 3rd straight m/o/m decline, and the largest single month dip in the history of our index, going back to 2017. The timing of the recent cooldown in the rental market is consistent with the typical seasonal trend, but its magnitude has been notably sharper than what we’ve seen in the past, suggesting that the recent swings to falling rents is reflective of a broader shift in market conditions beyond seasonality alone. Going forward it is likely that rents will continue to dip further in the coming months as we move through the winter slow season for the rental market.” Year to date rent growth is 4.7%, closer to the pace seen in 2018 and 2019 and well off the red hot pace of 18% last year. The vacancy rate also is picking up to 5.7% after bottoming at 4.1% one year ago. “Today’s vacancy rate still remains below the pre-pandemic norm, but could get back to that benchmark as early as next spring, if the current rate of easing continues.”
5)Pending existing home sales in October fell 4.6% m/o/m, not as bad as the 5.3% drop expected and September was less worse than initially reported as it was revised up by 150 bps to an 8.7% fall. Regardless, pending home sales have fallen in 11 out of the last 12 months.
6)The average 30 yr mortgage rate fell for a 3rd straight week to 6.49% according to the MBA. As this data is for the week ended November 25th, the Thanksgiving holiday likely also distorted the numbers as refi’s fell 13% w/o/w while purchases were up 3.8%. Versus last year, refi’s are down by 86% and by 41% for purchases.
7)The S&P CoreLogic September home price index saw a 10.7% y/o/y increase, continuing to slow due to tough comps and outright declines m/o/m for a 3rd straight month.
8)The PCE October inflation deflator was up .3% m/o/m headline and .2% core, about as expected when you include the September slight upward revision (decimal points). The y/o/y gain was 6% headline and 5% core.
9)October personal spending was up .8% m/o/m as expected with a pickup in spending on goods (maybe in response to discounting going on) while income was higher by .7%, 3 tenths more than forecasted. On income, transfer payments led the way. Private sector wages and salaries rose .5% m/o/m.
10)The November Eurozone CPI figure was up 10% y/o/y vs 10.6% in October and 4 tenths less than expected. The slower increase in the rate of energy price increases was the reason for the moderation. Taking out food and energy though and it was up 5% as forecasted and at the same pace seen last month.
11)The November Eurozone Economic Confidence index did rise 1 pt to 93.7, .5 pt above the estimate. The boost was driven by a rise in consumer confidence and for services while manufacturing and construction confidence fell and was unchanged with retailers.
12)Those manufacturing PMI’s above 50 were in India, Thailand, Indonesia and the Philippines.
13)Japan’s October jobs data was about as forecasted with its unemployment rate holding at 2.6% (est was 2.5%) while the jobs to applicant ratio rose to 1.35 from 1.34.
14)After incredible protests reflecting outright disgust, a multitude of announced policy changes are pointing to steps closer to reopening in China.
Negatives
1)There was a drop of 138k in the November household survey after a 328k job loss in October. The reason though why the unemployment rate held at 3.7% was because the labor force shrunk by 186k. The all in U6 rate fell one tenth to 6.7%. The average work week moderated to 34.4 from 34.5 and combined with hourly earnings resulted in average weekly earnings of .3% m/o/m and 3.9% y/o/y. The participation rate fell for a 3rd straight month to 62.1% and the employment to population ratio is back below 60% at 59.9%. The important 25-54 age cohort saw its participation rate also fall for a 3rd month to 82.4%. It was 83.1% in January 2020. The job leavers as a % of the unemployed moderated to 13.9% from 14.6% in October and 15.9% in September.
2)ADP said only a net 127k private sector jobs were created in November, below the estimate of 200k and almost half the pace of 239k seen in October. The ADP chief economist said broadly, “Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains. In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing.”
3)Quantifying the job losses in tech, Challenger’s labor report said the sector announced 52,771 jobs cuts in November, “for a total of 80,978 this year. This is the highest monthly total for the sector since the firm began keeping detailed industry data in 2000. It is the highest YTD total for the sector since 2002, when 128,563 Tech sector cuts were recorded through November and 131,294 for the year. This year’s tech cuts are 535% higher than the 12,761 cuts announced through the same period in 2021.”
4)Continuing claims are now above 1.6mm at 1.61mm, about 40k more than expected, up from 1.55mm in the week before and the most since March.
5)Job openings in October totaled 10.33mm, down from 10.69mm in September. That is the 2nd lowest number since June 2021.The hiring rate fell to 3.9% from 4% and that is the lowest since January 2020 if we take out the covid impact. The quit rate moderated too, to 2.6% from 2.7% and that is the least since May 2021.
6)The US personal savings rate is now down to just 2.3%. The last time I saw something less was 2.1% in July 2005 in data going back to 1959.
7)US auto sales in November totaled 14.14mm at a SAAR according to Wards Automotive. That was below the estimate of 14.5mm and down from 14.9mm in October. That compares with 12.86mm one year ago. Ward’s said “The sequential decline was despite rising inventory, especially of fullsize trucks, which typically have their strongest results in the fourth quarter…Elevated prices of what is available on dealer lots, combined with rising interest rates and fear of recession, are keeping more potential buyers out of the market.”
8)The November ISM manufacturing index fell into contraction at 49 vs 50.2 in October and below the estimate of 49.7. This is the first time this number has printed below 50 since May 2020. New orders fell 2 pts to 47.2 and that is below 50 for the 3rd straight month. Backlogs dropped all the way down to 40 from 45.3 in October and 50.9 in September. Of the 18 industries surveyed, only 6 saw growth vs 8 in the month before and 9 the month before that. Those seeing a contraction totaled 12 industries vs 10 in October. Chemicals in particular, a key building block to just about everything that is produced, contracted for a 4th straight month.
9)The November Conference Board’s consumer confidence index fell 2 pts m/o/m to 100.2 about as expected. Both the Present Situation and Expectations components declined. One yr inflation expectations rose to 7.2% from 6.9% and that’s a 4 month high. After weakening last month, the answers to the labor market questions were mixed. After improving last month, spending intentions softened again. The Conference Board said simply, “The combination of inflation and interest rate hikes will continue to pose challenges to confidence and economic growth into early 2023.”
10)The US goods trade deficit in October widened to $99b from $92b in September as exports fell 2.6% m/o/m while imports rose by .9% m/o/m.
11)November manufacturing PMI’s in Asia that were below 50 was seen in Taiwan, South Korea, Japan, Vietnam and Malaysia. China’s private sector Caixin manufacturing index was 49.4 vs 49.2 in October.
12)Vietnam said its November exports fell 8.4% y/o/y, well worse than the estimate of down 2.3%. Imports were also less than expected.
13)The November Eurozone manufacturing PMI was revised slightly lower to a still weak 47.1 while the UK print was revised up to 46.5 from 46.2 but still below 50.
14)German said its exports in October fell .6% m/o/m, 4 tenths more than expected and September was revised lower by 2 tenths to a drop of .7%. Most of the weakness was within the EU itself and while I don’t have the exact number, assume exports were down to their biggest customer, China.
15)The inflation stressed consumer in the UK was reflected in the November CBI retail index which was -24 vs zero in October and -26 in September. CBI said “It’s not surprising that retailers are feeling the chill as the UK continues to be buffeted by economic headwinds. Sales volumes fell at a firm pace in the year to November, and retailers remain notably downbeat about their future business prospects. This pessimism is reflected in investment intentions worsening to the greatest extent since May 2020.”