Positives
1)Payrolls grew by 223k in December, 20k more than expected but the two prior months were revised down by 28k so let’s call it a push. The household survey saw a big jump of 717k jobs (all part time though) and when combined with the rise in the labor force of 439k, the unemployment rate fell to 3.5%, back to the level seen before Covid hit. The all in U6 fell to 6.5%, the lowest dating back to 1994 when this figure was first calculated. The participation rate did clock in at 62.3%, up 2 tenths m/o/m. This is still below the February 2020 level though of 63.3%. The key 25-54 cohort saw its participation rate up by one tenth to 82.4% vs 83% in February 2020. Job leavers as a % of the unemployed rose to 14.4% but just getting back the fall last month.
2)Initial jobless claims fell to 204k from 223k but around the holidays you must just look at the 4 week average which was 214k vs 221k in the week before as a print of 231k fell out. Continuing claims fell back below 1.7mm at 1.694mm.
3)The December Logistics Managers’ Index rose 1 pt m/o/m but has still fallen in 7 out of the past 8 months. While the rise in inventories is going to be a key factor in Q4 GDP, “Like November, inventory levels are increasing at a much slower rate than was observed throughout most of 2022.” Inventory levels were much higher at retail than at the manufacturing level as the former “dealt with more limited warehousing as they pushed to get goods to consumers for holiday shopping.” Transportation Utilization fell below 50 for the first time since April 2020 and Transportation Prices fell to 36.9, “which is the sharpest rate of contraction we have measured for this metric in the over six years of the LMI.”
4)Job openings in November totaled 10.46mm, down only slightly from October and about 400k more than expected. The hiring rate though fell to 3.9%, the lowest since the shutdowns. The quit rate rose back to 2.7% from 2.6%.
5)In the Eurozone, December headline CPI fell .3% m/o/m, more than the forecast of down .1%. The y/o/y gain slowed to 9.2% from 10.1%, 3 tenths below the estimate. The core rate though accelerated to 5.2% y/o/y vs 5% in November and that was one tenth more than anticipated.
6)The Eurozone December Economic Confidence index rose to 95.8 from 94 and that was 1 pt better than expected. All 5 of the internal confidence components rose m/o/m, that being manufacturing, services, consumer, retail and construction.
7)The December Eurozone services PMI was revised up to 49.8 from the initial print of 49.1 and vs 48.5 in November. It’s the first m/o/m gain since April 2022. “Services inflation remains stickier for now, reflecting a sharp rise in labor costs, which continued to be pushed up by continued hiring efforts.” It’s in manufacturing that is seeing the price relief right now. With respect to the outlook, “business confidence edged up to a 4 month peak but remained historically subdued” and “Demand conditions remained fragile as clients have retrenched, while business confidence remains bogged down by recession concerns, energy cost uncertainty and persistently high inflation and a tightening of financial conditions.”
8)The Dutch TTF natural gas price fell to the lowest level since before the Russian invasion.
9)China’s Caixin services PMI for December remained below 50 not surprisingly but did rise to 48 from 46.7. Hong Kong’s PMI rose about 1 pt to 49.6.
10)India saw a rise in its services PMI to 58.5 in December and manufacturing PMI’s in India, Indonesia and the Philippines all rose m/o/m and remained above 50. Thailand’s PMI was up m/o/m too at 52.5.
11)For maturities of more than 1 yr, there is no longer a negative yielding bond in the world.
12)What an incredible recovery story that is Damar Hamlin, //twitter.com/BuffaloBills/status/1611383102013857792
Negatives
1)In the payroll data, the workweek fell to the lowest level since April 2020. Wage growth moderated and still remains below the rate of inflation.
2)The December ISM services index fell to 49.6 from 56.5 in November. Not including Covid, this is the first time we’ve seen a below 50 figure since December 2009. New orders in particular plunged by 10.8 pts to 45.2. Of the 18 industries surveyed, 11 saw growth and 6 saw a contraction with 1 reporting no change. That compares with 13 seeing growth in November and 3 a contraction. It was back in June when all 18 saw growth. Just 5 industries said they saw an increase in new orders and employment.
3)The December ISM manufacturing index was 48.4, down from 49 in November but about as expected. The last time this sector was in contraction was during the shutdowns and before that in the 2nd half of 2019 in response to the China tariffs. Of the 18 industries surveyed, only 2 saw growth (metals and petro/coal) with 13 seeing a drop in business. The balance saw no change. This compares with 6 that grew in November, 8 in October and 15 back in June. The chemical industry in particular, whose products end up in just about everything, has contracted for a 5th straight month.
4)Wards said December vehicle sales out yesterday totaled 13.3mm at a SAAR, 100k less than expected. That’s down from 14.1mm in November but above the inventory starved situation in December 2021 when sales came in at just 12.44mm.
5)Mortgage apps saw a sharp drop in purchase applications of 12% w/o/w and 4.4% with refi’s but around the holidays this data is worthless info as the MBA does a poor job of seasonally adjusting.
6)The November trade deficit did shrink but not for good reason. Exports fell 2% m/o/m while imports were lower by 6.4%.
7)Germany said November factory orders dropped by 5.3% m/o/m, well worse than the estimate of down .5%. The Economy Ministry said that “industry is going through a difficult winter, even though companies’ business expectations have improved recently.” Retail sales in Germany slightly missed the forecast.
8)Real wages in Japan in November fell 3.8% y/o/y.
9)The December Caixin China manufacturing PMI fell to 49 from 49.4 and PMI’s in Taiwan, Vietnam, South Korea and Malaysia all remained below 50.
10)Singapore’s PMI fell under 50 at 49.1 from 56.2. S&P Global said “The issue of deteriorating demand that had plagued many neighboring Asian countries has likewise set in for Singapore, albeit at a marginal level. The downturn in demand not only affected firms’ willingness to accumulate inputs and labor, but also shifted the pricing power away from businesses as indicated by the fall in selling price inflation even as input cost pressures mounted.”