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January 7, 2022 By Peter Boockvar

Succinct Summation of the Week’s Events – 1/7


Positives

1)The household survey in the BLS payroll data said 651k jobs were added after 1.1mm in November. Combine this with a rise of 168k in the labor force and the unemployment rate now has a 3 handle at 3.9%. This compares with 3.5% in February 2020. The all inclusive U6 rate dropped 4 tenths to 7.3% and this was 7% in February 2020. Average hourly hours jumped .6% m/o/m, 2 tenths more than expected and November was revised up by one tenth to a gain of .4%. Versus last year, they are now up 4.7% y/o/y after a 5.1% print in the month prior. Combining hours worked and the hourly wage, average weekly earnings rose .6% m/o/m and 4.7% y/o/y too. Over the last 6 months, average hourly earnings are up at a 6% annualized pace, the best in decades outside of the Covid data noise in April/May 2020. The employment to population ratio was up another 2 tenths to 59.5% and creeps closer to the 61.2% February 2020 level.

2)ADP said a net 807k private sector jobs were added in December which was about double the estimate. November was revised down modestly to 505k from the 1st print of 534k.

3)The December Logistics Managers’ Index was 70.1, down 3.3 pts in November. What this means is this, “Growth is INCREASING AT A DECREASING RATE for: inventory costs, warehousing utilization warehousing prices, transportation utilization and transportation prices.” As for inventory levels, “growth is INCREASING AT AN INCREASING RATE.” With respect to capacity, “warehousing capacity and transportation capacity are CONTRACTING.” The large caps are theirs.

4)In Canada, job growth was 54.7k, more than double expectations and their unemployment rate ticked down by one tenth to 5.9%. 

5)China’s private sector December services PMI rose to 53.1 from 52.1 and that was above the estimated drop to 51.7. Caixin said firms saw “faster increases in both business activity and overall new work. Improved sales and efforts to increase capacity led to a further rise in staffing levels. Nonetheless, backlogs of work continued to increase and at the quickest rate for nearly two years. Cost pressures eased, with both input costs and output charges rising at weaker rates. However, uncertainty over the pandemic weighed on business confidence regarding the year ahead, with sentiment slipping to a 15 month low in December.”

6)The Caixin December Chinese manufacturing index rose 1 pt m/o/m to 50.9 and that was better than the estimate of little change to 50 and vs 50.6 in October. Caixin said “Firms signaled the strongest increase in output for a year amid a renewed uptick in total sales. However, foreign demand remained lackluster, with export orders broadly stagnant. Improved demand prompted a fresh rise in purchasing activity, but backlogs rose again amid a further drop in staffing levels. Supplier performance meanwhile deteriorated at a softer pace, and inflationary pressures weakened. Notably, average input costs rose at the slowest pace for 19 months.” Lower steel prices were specifically cited.

7)Singapore’s December PMI rose to 55.1 from 52. However, “the latest survey was taken ahead of heightened Covid concerns which led to the temporary suspension of VTL ticket sales.” Supply chains too were a problem, “supply constraints remained prevalent. Longer lead times, manpower shortages and resultant surge in prices all embodied the issues, although these remain linked to the demand-supply imbalances amid the recovery of APAC economies from the latest Delta wave.”

8)South Korea’s December manufacturing PMI rose 1 pt m/o/m to 51.9, Taiwan’s was up by .6 pts to 55.5, Malaysia’s was higher by .5 pt to 52.8, the Philippines increased by a slight .1 pt to 51.8 and Vietnam’s manufacturing PMI rose .3 pts to 52.5.

9)Germany said its exports rose by 1.7% m/o/m in November which exceeded expectations of down .2%.

10)Germany said the number of unemployed in December fell by 23k, more than the estimate of 15k but I’m not sure to what extent the survey was done before some recent covid restrictions. Their unemployment rate fell one tenth to 5.2% which is now within just 2 tenths of its pre Covid level.



Negatives

1)The BLS said its establishment survey saw a rise in jobs of 199k, less than half the estimate of 450k but partially offset by an upward revision of 141k to the two prior months. The private sector contributed 211k of this. Hours worked was unchanged at 34.7 but the estimate was 34.8 and last month was revised down to 34.7. The participation rate held at 61.9%. It was steady at 81.9% for 25-54 year olds.

2)Initial jobless claims rose to 207k from 198k. That was 12k more than expected but it’s important to smooth out the influence of the holidays. The 4 week average was 205k vs 200k last week and vs 207k in the week prior. Continuing claims totaled 1.754mm which was above expectations and up from 1.72mm in the week before but again, the holidays messes around with the seasonal calculations.

3)The December ISM services index fell to 62 from 69.1 and that was well below the estimate of 67. Of the 18 industries asked, 16 saw growth vs 18 in the two prior months. ISM said “Although there was a pullback for most of the indexes in December, the rate of growth remains strong for the services sector” but here’s the catch, “respondents have indicated that they continue to struggle with inflation, supply chain disruptions, capacity constraints, logistical challenges and shortages of labor and materials.”

4)The December ISM manufacturing index fell to 58.7 from 61.1 and that was just below the estimate of 60. It also matches the lowest level since November 2020. Of the 18 industries surveyed, 15 saw growth vs 13 in November and 16 in October. The ISM bottom line was this, “The US manufacturing sector remains in a demand drive, supply chain constrained environment, with indications of improvements in labor resources and supplier delivery performance. Shortages of critical lowest tier materials, high commodity prices and difficulties in transporting products continue to plague reliable consumption. Coronavirus pandemic related global issues – worker absenteeism, short term shutdowns due to parts shortages, employee turnover and overseas supply chain problems – continue to impact manufacturing.”

5)December auto sales clocked in at 12.44mm at a seasonally adjusted annualized rate, well below the estimate of 13.1mm and down from 12.86mm in November and which compares with 16.7mm in December 2019.

6)Apartment List released its 1st National Rent Report of 2022 and rents in December were flattish, falling by .2% m/o/m, “marking the only time in 2021 when rents declined m/o/m.” But, in 2021, rents rose “a staggering 17.8%. To put that in context, annual rent growth averaged just 2.3% in the pre-pandemic years from 2017-2019.”

7)Eurozone CPI increased by .4% m/o/m and 5% y/o/y vs the estimates of up .3% and 4.8%. Importantly, the core rate was higher by 2.6% for a 2nd month and one tenth more than forecasted. Within this, non energy industrial goods prices grew by 2.9% y/o/y and services were up by 2.4%. Energy prices certainly drove the top line with its 26% jump.

8)November PPI for the Eurozone increased a whopping 23.7% y/o/y.

9)The December Eurozone services PMI was revised down to 53.1 from the initial print of 53.3. That is down from 55.4 in November and the lowest since February 2021. Omicron is definitely the culprit. With pricing, “Although there was a marginal easing of price pressures, we’re still in excessively hot territory – increases in both input and output costs were the 2nd quickest on record.”

10)The December UK services PMI was revised to 53.6 from the 1st print of 53.2 but that is down from 58.5 in November and we can blame omicron. Markit said “Total new orders in the service sector increased at the weakest pace for 10 months. Mass cancellations of bookings in response to the omicron variant led to a slump in consumer spending on travel, leisure and entertainment. Survey respondents also noted that renewed pandemic restrictions had slowed the recovery in business services.” Notwithstanding this short term concern, “service providers signaled strong confidence about the longer term business outlook. Around 55% of the survey panel anticipate a rise in output during 2022 as a whole, while only 10% expect a decline.”

11)The December Eurozone manufacturing PMI was left unrevised at 58 vs 58.4 in November, the lowest since February. There were some supply pressures bright spots though as Markit saw some “further easing of the supply chain crisis as average lead times lengthened to the softest extent since February. Firms took advantage of this relative gain and added purchases to their inventories at the fastest rate ever recorded by the survey, outpacing the previous record set in November by a notable margin…Meanwhile, rates of input cost and output price inflation eased, but remained among the fastest ever seen by the survey.” With respect to the labor market, “the rate of jobs growth was strong and above its historical average by a notable margin. Business confidence also strengthened slightly to a 3 month high.”

12)The December Eurozone Economic Confidence index fell to 115.3 from 117.6 and just under the estimate of 116. We can blame omicron as the services component plunged by 7 pts to the lowest since April. Retail and consumer confidence also fell but manufacturing remained strong as did construction.

13)Both German and French industrial production for November missed expectations. 

14)Consumer price inflation in Tokyo in December was higher by .8% y/o/y, the fastest since December 2019 and all led by higher food and energy prices. Because of the plunge in mobile phone fees, the core/core rate was down though by .3%.

15)Hong Kong’s December PMI fell to 50.8 from 52.6 with the Covid hardline the main reason. India’s services PMI for December fell to 55.1 from 58.1. Thailand’s slipped by 1.1 pts and back below 50 at 49.5. Indonesia PMI was down by .4 pts to 53.5 and India’s to 55.5 from 57.6.

16)Putting the rate cuts in Turkey to 14% over the past few months into perspective, Turkey reported that its December CPI rose 36% y/o/y. The estimate was 27%. Wholesale prices almost doubled, up by 80% y/o/y vs the forecast of up 68%.

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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