PCE rose 2.4% YoY and Core PCE rose 2.8% YoY in November 2024 Report
12/20/2024 03:00 pm EST
AJ Economy Trend - US Down with continuous increase in inflation
The November 2024 Personal Income and Outlays report by the U.S. Bureau of Economic Analysis highlights a steady economic progression, with increases in personal income, disposable income, and personal consumption expenditures (PCE).
Personal Income and Disposable Personal Income (DPI):
Personal income rose by $71.1 billion (0.3%), reflecting higher compensation despite decreases in income from assets and transfer receipts.
DPI, income after taxes, increased by $61.1 billion (0.3%).
Personal Consumption Expenditures (PCE):
Increased by $81.3 billion (0.4%), with significant growth in:
Goods: Up $48.3 billion, driven by spending on new motor vehicles and recreational goods (e.g., electronics).
Services: Up $33.0 billion, led by financial services, recreation services, and healthcare.
Real Income and Spending Adjustments:
Real DPI (inflation-adjusted): Increased 0.2%.
Real PCE: Rose 0.3%, with a notable 0.7% rise in goods and 0.1% in services.
Price Indexes:
The overall PCE price index increased 0.1% from October, with goods prices largely flat and services up 0.2%.
Year-over-year, the PCE price index rose 2.4%, while the core PCE price index (excluding food and energy) increased 2.8%.
Personal Savings:
Personal saving rate was 4.4%, reflecting savings of $968.1 billion, down slightly due to rising consumption outlays.
Leading Economic Index shows first increase since February 2022 mainly due to contribution of Equity
12/19/2024 12:00 pm EST
AJ Economy Trend - US Neutral with LEI showing first increase since Feb 2022
Leading Economic Index (LEI)
November Growth: The LEI rose by 0.3% to 99.7 (2016=100), marking the first increase since February 2022 and nearly reversing the 0.4% decline in October.
Six-Month Trend: The index fell by 1.6% between May and November 2024, slightly less than the 1.9% decline from November 2023 to May 2024.
Key Drivers:
A rebound in building permits, particularly for 5+ unit structures in the Northeast and Midwest.
Continued support from equities (stock market).
Improvements in average manufacturing hours and fewer initial unemployment claims.
Economic Outlook: The Conference Board forecasts 2.7% GDP growth for 2024, with a potential slowdown to 2.0% in 2025.
Coincident Economic Index (CEI)
November Growth: The CEI increased by 0.1% to 113.0, maintaining consistent monthly growth since July.
Six-Month Trend: Grew by 0.6% over the past six months, slightly higher than the 0.5% growth in the prior period.
Components:
Positive contributions from payroll employment, personal income less transfer payments, and manufacturing and trade sales.
Industrial production declined for the third consecutive month.
Correlation with GDP: The CEI reflects current economic conditions and aligns closely with real GDP trends.
Lagging Economic Index (LAG)
November Growth: The LAG rose by 0.3% to 118.8, following a 0.1% decline in October.
Six-Month Trend: Declined by 0.4% between May and November, reversing part of the 0.6% increase in the previous period.
Manufacturing Business Survey dropped significantly to -16.4 with 33% of firms reported decreases in activity in December 2024
12/19/2024 12:00 pm EST
AJ Economy Trend - US Down with decrease in Manufacturing Activity
December 2024 Manufacturing Business Survey
Overall Manufacturing Activity
General Activity: The diffusion index for current general activity dropped significantly from -5.5 to -16.4, reaching its lowest since April 2023. About 33% of firms reported decreases in general activity, while only 16% reported increases.
New Orders and Shipments: Both indexes turned negative, with the new orders index at -4.3 (lowest since May) and the shipments index at -1.9.
Employment: Employment saw modest growth, but the index edged down to 6.6. Over 17% of firms reported employment increases, while 11% reported decreases. The average workweek index fell sharply to -8.2.
Pricing Trends
Prices Paid: The prices paid index rose to 31.2, indicating higher input costs. Approximately 34% of firms reported input price increases.
Prices Received: The index for prices received fell to 7.3, reflecting softer pricing power despite overall price increases.
Production and Capacity Utilization
Production: Half of the firms reported decreased production in Q4 2024 compared to Q3, while only 30% reported increases.
Capacity Utilization: Median capacity utilization remained steady at 70–80%. However, firms noted persistent constraints, particularly from labor supply (33% moderate or significant constraint) and supply chain challenges (over 50%).
Future Expectations
The future general activity index softened, dropping 26 points to 30.7, though it remains positive, with 49% of firms expecting growth over the next six months.
Future new orders and shipments indexes declined but stayed above historical averages.
The future employment index remained optimistic at 32.1, while capital expenditure expectations weakened (18.8 from 24.9).
U.S GDP increased by annualized rate of 3.1% with key increase in consumer spending
12/19/2024 12:00 pm EST
AJ Economy Trend - US Neutral with increase in GDP due to consumer spending as main contributor, which also increase credit card debt level
The U.S. economy demonstrated robust growth in the third quarter of 2024, with the Gross Domestic Product (GDP) increasing at an annualized rate of 3.1%.
This figure surpasses the earlier estimate of 2.8%, indicating stronger-than-anticipated economic performance.
Key Contributors to GDP Growth:
Consumer Spending: A significant driver of this growth was consumer spending, which rose by 3.7%.
This marks the fastest pace since early 2023, reflecting sustained consumer confidence and expenditure.
Exports: Exports experienced a notable increase of 9.6%, contributing positively to the GDP.
Business Investment: While overall business investment remained modest, investment in equipment saw a substantial rise of 10.8%, indicating business confidence in expanding productive capacity.
Inflation and Federal Reserve Actions:
Inflation showed signs of easing, with the personal consumption expenditures (PCE) index rising at a lower rate, aligning closer to the Federal Reserve's target.
In response to the economic conditions, the Federal Reserve implemented its third consecutive interest rate cut, projecting only two more cuts in 2025 due to the economy's continued resilience and persistent inflation.
Outlook:
Despite the robust growth, there is uncertainty about economic policies under President-elect Donald Trump's incoming administration, which could include tariffs and mass deportations that might drive inflation.
Overall, economic indicators such as job openings and consumer spending suggest the economy's current strength, although challenges might arise in 2025.
Initial Jobless Claims decreased slightly to 220,000 with 4 week moving average increased slightly
12/19/2024 05:00 pm EST
AJ Economy Trend - US Neutral with little change on initial jobless claims
Seasonally Adjusted Initial Claims
Advance figure: 220,000 claims, a decrease of 22,000 from the previous week (242,000).
4-week moving average: Increased slightly by 1,250 to 225,500 from the prior average of 224,250.
Seasonally Adjusted Insured Unemployment:
Insured unemployment rate: Steady at 1.2% for the week ending December 7.
Total insured unemployment: 1,874,000, a slight decrease of 5,000 from the previous week's revised total (1,879,000).
4-week moving average: Decreased by 6,000 to 1,880,250.
Unadjusted Data:
Unadjusted initial claims: 251,527, reflecting a drop of 57,932 claims (-18.7%) from the previous week.
Seasonal factors predicted a lesser decrease (-10.6%).
Unadjusted insured unemployment: 1,873,935, a drop of 57,490 (-3.0%) from the previous week.
Comparable week in 2023:
Initial claims were slightly lower at 241,040.
Insured unemployment was similar at 1,835,427.
Extended Benefits Program:
No states triggered "on" Extended Benefits during the week ending November 30.
Federal and Veteran Claims:
Claims by former Federal civilian employees increased to 755 (+356 from the prior week).
Newly discharged veterans filed 500 initial claims, up by 274 from the preceding week.
State-Level Observations
Highest Insured Unemployment Rates:
New Jersey: 2.5%
California: 2.3%
Washington: 2.2%
Alaska, Minnesota: 2.1%
Significant Changes in Initial Claims:
Largest Increases:
California: +14,411
Texas: +10,011
New York: +8,926
Illinois: +7,426
Georgia: +6,119
Largest Decreases:
North Dakota: -788
Delaware: -163
Conclusion
The decline in initial claims and insured unemployment suggests a positive trend in the labor market, possibly indicating seasonal hiring boosts.
State-specific increases, particularly in California and Texas, could point to localized economic challenges or reporting anomalies.
Unadjusted figures exceeded seasonal expectations, hinting at stronger-than-anticipated improvements.
Comparisons with the same period in 2023 show relative stability, with slight improvements in initial claims but similar unemployment rates.
This data highlights a steady labor market with positive trends in claims reductions, though state-specific challenges and minor fluctuations warrant closer monitoring.
Yield Curve Un-inverted after Fed’s interest rate decision, indicating trouble ahead of stock market and economy
12/18/2024 05:00 pm EST
AJ Economy Trend - US Down with Yield Curve Un-inverted
The U.S. Treasury yield curve displays a slight inversion in the short- to medium-term range, reflecting economic uncertainties and concerns about a potential recession, while long-term yields show a gradual upward trend, indicating improving long-term expectations.
Short-Term Yields (1M to 1Y):
Yields range from 4.324% to 4.392%, with minor increases across most maturities (e.g., the 1-month yield rose by 0.35%).
These elevated short-term rates indicate tighter monetary policy effects.
Medium-Term Yields (2Y to 5Y):
Yields are between 4.352% and 4.409%, maintaining a flat or slightly declining trend relative to short-term yields, characteristic of an inverted curve.
Long-Term Yields (7Y to 30Y):
Yields rise progressively from 4.475% (7Y) to 4.692% (30Y), reflecting higher inflation expectations and stronger long-term growth sentiment.
Overall Yield Curve Trends:
The inversion in the short to medium range underscores lingering economic uncertainty and potential recessionary risks.
The upward slope in longer maturities suggests the market anticipates stabilization and modest growth in the long term.
This movement follows the Federal Reserve's recent 25 basis point rate cut and reflects a balancing act between short-term rate sensitivity and long-term growth prospects.
Fed Cuts Interest Rates by 50 bps, indicated less rate cut in 2025 due to strong economic data
12/18/2024 05:00 pm EST
AJ Economy Trend - US Down less rate cut and Fed remaining in restrictive policy
The Federal Reserve has reduced the federal funds rate by 25 basis points, bringing it to a target range of 4.25% to 4.5%. This marks the third consecutive rate cut this year, aligning with market expectations.
In its latest projections, the Fed anticipates two rate cuts in 2025, totaling 50 basis points, a reduction from the previously projected 100 basis points. This adjustment reflects concerns about persistent inflation, with core PCE inflation now expected to be 2.5% in 2025, up from the earlier estimate of 2.1%.
The Fed has also revised its GDP growth forecasts upward for 2024 and 2025, indicating a more robust economic outlook. Unemployment projections have been adjusted downward for 2024 and 2025, suggesting a stronger labor market than previously anticipated.
Fed Chair Jerome Powell emphasized that future rate decisions will depend on continued progress in reducing inflation. He noted that while there has been improvement, certain areas, such as shelter costs, have not declined as expected.
The market reacted to the Fed's announcements with declines in both stocks and bonds. Major indices, including the S&P 500 and Nasdaq, experienced significant losses, and Treasury yields rose, reflecting investor concerns about the pace of future rate cuts and ongoing inflation challenges.
US Industrial production declined by 0.9% year over year in November 2024
12/17/2024 12:00 pm EST
AJ Economy Trend - US Down due to decrease in industrial production
Industrial production in the United States declined by 0.9% year-on-year in November 2024, according to the Federal Reserve. This follows a revised 0.5% decrease in October, marking the third consecutive month of contraction in industrial output. The November decline represents a sharper contraction compared to the previous two months, signaling mounting challenges in the industrial sector.
Manufacturing Output: Likely impacted by weakening demand, higher borrowing costs, and lingering supply chain disruptions.
Mining and Energy: Potential declines in mining activities and changes in energy production may have also contributed to the contraction.
Broader Context: The contraction aligns with signs of slowing economic growth, with industrial activity reflecting reduced consumer and business demand for goods.
Economic Growth: A sustained decline in industrial production could weigh on GDP growth, as it reflects weaker activity in key economic sectors.
Monetary Policy: The Federal Reserve may monitor this trend closely, especially if slowing industrial production signals a broader economic slowdown.
Sectoral Outlook: Persistent challenges such as global trade headwinds, input costs, and tighter financial conditions could further pressure the industrial sector in the near term.
The trend highlights vulnerabilities in U.S. industrial activity, potentially impacting broader economic performance if these declines persist.
US Retail Spending increased by 0.7% month over month
12/17/2024 12:00 pm EST
AJ Economy Trend - US Up Due to increase in retail spending
Data released by the U.S. Census Bureau for November 2024 retail sales showed a notable pickup in consumer spending, with overall sales increasing by 0.7% month-over-month. This figure not only exceeded market expectations of a 0.5% rise but also followed an upward revision to October’s growth, which now stands at 0.5%. The results underscore robust consumer demand heading into the holiday season.
Among the categories, motor vehicles and parts dealers led the gains with a 2.6% monthly increase, while nonstore retailers (such as online merchants) advanced by 1.8%. Additional modest increases were registered in spending at sporting goods, hobby, musical instrument, and book stores (0.9%); building materials and garden equipment suppliers (0.4%); furniture stores (0.3%); electronics and appliance outlets (0.3%); and gasoline stations (0.1%).
However, not all segments posted gains. Sales remained flat for health and personal care stores, and declines were noted at miscellaneous store retailers (-3.5%), food services and drinking places (-0.4%), food and beverage stores (-0.2%), clothing retailers (-0.2%), and general merchandise stores (-0.1%).
Stripping out the more volatile categories—food services, auto dealers, building materials, and gasoline stations—core retail sales, which feed into GDP calculations, rose by 0.4%, suggesting a solid underlying trend in consumer spending.
Canada’s Annual Inflation Rate stood at 1.9%, slightly lower than expectation of 2%
12/17/2024 12:00 pm EST
AJ Economy Trend - Canada Down due to emerging disinflation of price and deflation in specific sectors
In November 2024, Canada’s annual inflation rate stood at 1.9%, easing slightly from the 2% rate recorded in October and falling short of market expectations, which had also pointed to a 2% increase. This aligns closely with the Bank of Canada’s baseline scenario that headline inflation would hover around the 2% mark going forward.
However, while headline inflation moderated, the core inflation measure suggested somewhat stickier underlying price pressures. The trimmed-mean core inflation rate remained at 2.7%—unchanged from October—despite forecasts calling for a dip to 2.5%. This stubbornly high core measure may limit the central bank’s capacity to cut interest rates aggressively as it aims to balance price stability with supporting economic growth.
Breaking down the components, gasoline prices recorded a smaller annual decline in November (-0.5%) compared to October’s steeper drop (-4%), as the fading of base effects caused transportation costs to pick up pace (1.1% vs 0.2% in October). Meanwhile, shelter inflation eased (4.6% vs 4.8%) as muted mortgage cost growth outweighed rising rental prices. Food inflation also moderated (2.8% vs 3%) due to softer price increases in grocery stores.
On a monthly basis, the overall Consumer Price Index (CPI) was flat, showing no change from October. This combination of slightly softer headline inflation, persistent core pressures, and stable monthly prices reflects a complex inflationary environment that policymakers must navigate carefully.
United Kingdom’s unemployment rate held steady at 4.3%
12/17/2024 10:00 am EST
AJ Economy Trend - UK Down due to highest unemployment rate since May 2024
The latest data from the UK’s Office for National Statistics (ONS) covering the August to October 2024 period indicates that the unemployment rate held steady at 4.3%, the same as the previous reporting period. Notably, this level remains the highest since the quarter ending in May 2024. A key driver behind the plateau in unemployment was an increase in individuals unemployed for up to 12 months.
Looking at changes over the year, a rise in long-term unemployment was evident. Compared to the August to October 2023 period, the number of unemployed individuals increased primarily due to those out of work for more than six months.
On the employment side, total employment grew by 173,000, reaching 33.77 million. Year-over-year gains were seen among full-time employees and the self-employed. Another noteworthy trend was the uptick in second-job holders, who now make up 3.7% of the employed workforce, reflecting a growing prevalence of multiple job holdings.
Meanwhile, the economic inactivity rate remained unchanged at 21.7%, suggesting stability in the proportion of people neither employed nor actively seeking employment during this period.
Service PMI remains rose to 58.5 in December 2024, indicating expansion in services sector since October 2021
12/16/2024 01:00 pm EST
AJ Economy Trend - US Up Due to Rising Service PMI
The S&P Global US Services PMI rose to 58.5 in December 2024, up from 56.1 in November, marking the fastest expansion in the services sector since October 2021. This strong performance underscores the resilience of the U.S. economy, driven by robust demand and increased client activity.
Key Points:
Business Activity: Growth accelerated significantly, reflecting heightened consumer confidence and spending during the holiday season.
New Orders: A sharp increase in new business activity suggests continued consumer and business demand.
Employment: Employment levels rose for the first time in five months, indicating improved optimism among service providers.
Input and Output Prices: Input cost inflation persisted but showed signs of moderation, while firms raised selling prices at the slowest pace since May 2020.
Implications:
Economic Growth: The strong services PMI signals a positive end to 2024, highlighting the sector's pivotal role in offsetting manufacturing weaknesses.
Monetary Policy: Resilience in the services sector may influence Federal Reserve decisions, potentially keeping monetary policy tighter in the short term.
Inflation Outlook: Easing output price inflation could indicate broader moderation in inflationary pressures.
The robust performance of the services sector stands in sharp contrast to the challenges faced by the manufacturing sector, illustrating a diverging economic landscape in the U.S.
Manufacturing PMI remains in contraction for the past 6 months
12/16/2024 01:00 pm EST
AJ Economy Trend - US Down on Manufacturing Services
Contraction in Manufacturing PMI:
The Manufacturing PMI at 48.3 reflects contraction (below 50 indicates contraction) for the sixth consecutive month.
This persistent decline highlights structural weaknesses in the manufacturing sector, possibly tied to waning domestic and global demand, elevated costs, and policy uncertainties.
Drivers of Weakness:
New Orders Decline: Shrinking new orders underscore a lack of demand, which is the backbone of factory activity. This drop likely stems from reduced consumer spending, tighter monetary policy, and hesitancy from businesses to expand amid economic uncertainty.
Lowest Output Since 2009 (Excluding Q2 2020): The steep decline in output points to significant stress on production capabilities, with parallels to post-2008 financial crisis levels.
Tariff Concerns: The Trump administration's tariff threats may be deterring investment and increasing the cost of imported manufacturing inputs.
Employment Trends:
While employment grew at a slower pace, it remained positive, which is somewhat surprising given the overall contraction. However, this may reflect a lag in labor adjustments or efforts to address existing staff shortages.
The lengthening of lead times due to staff shortages hints at inefficiencies and operational strain despite the demand slowdown.
Inflationary Pressures:
Input prices for raw materials continue to rise, maintaining inflationary pressures in the sector. Manufacturers are likely caught between passing costs onto consumers (which could further suppress demand) and absorbing the costs (squeezing margins).
The Federal Reserve will be closely monitoring these inflation trends, as persistent cost increases in the goods sector could hinder their fight against inflation.
Germany’s wholesale price decreased by 0.6%
12/14/2024 01:00 pm EST
AJ Economy Trend - Germany Down due to price decrease
Year-on-Year Change:
Wholesale prices fell by 0.6%, a milder decline than October's 0.8% drop and the smallest since July 2024.
Significant decreases in:
Mineral oil products: -10.9%.
Computers and peripheral equipment: -6.3%.
Iron, steel, and ferrous semi-finished products: -5.4%.
Flat glass: -3.9%.
Notable increases in:
Coffee, tea, cocoa, and spices: +25.4%.
Non-ferrous metals and semi-finished products: +22.7%.
Sugar and bakery goods: +10.9%.
Milk products: +6.8%.
Waste and scrap: +5.2%.
Month-on-Month Change:
Wholesale prices were unchanged, easing more than the expected 0.2% increase and down from October's 0.4% rise.
This data indicates continued deflationary pressure in certain industrial and technology sectors, offset by sharp price increases in food-related and non-ferrous metal goods.
Initial Jobless Claims spiked up to 242,000 after Thanksgiving
12/14/2024 01:00 pm EST
AJ Economy Trend - US Down due to rising unemployment
Initial Jobless Claims (Week ending December 7):
Claims: 242,000 (+17,000 from prior week's revised figure of 225,000).
4-week moving average: 224,250 (+5,750 from prior week's revised average of 218,500).
Insured Unemployment (Week ending November 30):
Rate: 1.2% (unchanged from prior week).
Insured unemployed: 1,886,000 (+15,000 from prior week's 1,871,000).
4-week moving average: 1,888,000 (+3,500; highest since November 2021).
This reflects an uptick in unemployment claims and insured unemployment levels, with key averages reaching multi-year highs.
Bank of Canada lowered rates by 50 basis point, with the economy looking for expansion
12/12/2024 01:00 pm EST
AJ Economy Trend - Canada Down due to easing policy and expectation of recession
In December, the Bank of Canada (BoC) delivered a second consecutive 50 basis point interest rate cut, bringing the cumulative reduction in its benchmark rate to 175 basis points from the cycle’s previous high of 5%. This aggressive easing aligns with market expectations, reflecting recent economic developments. Notably, Canadian GDP expanded by just 1% (annualized) in the third quarter, falling short of the central bank’s projections and adding downside risks to the outlook for fourth-quarter growth. Despite these concerns, consumer spending data came in stronger than anticipated, providing a mixed picture of economic momentum.
Despite the back-to-back half-point cuts, BoC policymakers signaled a pause in aggressive monetary easing going forward. The central bank removed references suggesting that further rate cuts are likely if its baseline outlook is maintained, indicating a more cautious approach to additional policy support in 2025.
On the inflation front, the Bank of Canada expects price growth to hover near its 2% target over the next couple of years. However, officials acknowledged that potential tariffs under the incoming U.S. presidential administration introduce uncertainty into the inflation outlook. This geopolitical factor underscores the BoC’s cautious stance as it evaluates future policy moves in an environment of mixed domestic data and heightened external uncertainty.
United States’ Consumer Price Inflation Rate held steady at 3.3% in November 2024
12/12/2024 01:00 pm EST
AJ Economy Trend - US Down due to Price Deceleration
The annual core consumer price inflation rate in the United States held steady at 3.3% in November 2024, unchanged from October and September, and matching market expectations. This marks three consecutive months at the same rate, indicating that core inflation has not accelerated despite remaining at a relatively elevated level.
Within the core index, service prices (excluding energy services)—a key category that the Federal Reserve often examines for signs of underlying inflationary pressures—eased slightly. They rose by 4.6% year-over-year, down from 4.8% in October. This deceleration was led by more moderate increases in important components like shelter costs (4.7% vs. 4.9% previously) and transportation services (7.1% vs. 8.2%), suggesting some cooling in the sectors that had seen pronounced gains earlier in the year.
On a month-to-month basis, core consumer prices rose by 0.3% in November, consistent with the pace observed over the last three months and in line with expectations. This steady monthly gain indicates that while inflation isn’t accelerating, it also isn’t showing strong signs of declining back toward the Federal Reserve’s 2% target just yet.
Overall, the data suggests a stable inflation picture: annual core inflation remains steady, with a slight easing in some service sectors, but monthly increases are still running at a pace that may keep the Federal Reserve cautious as it evaluates its policy stance going forward.
Canada’s unemployment rate rose to 6.8%, surpassed expectations of 6.6%
12/08/2024 01:00 pm EST
AJ Economy Trend - Canada Down due to unemployment
In November 2024, Canada's unemployment rate rose to 6.8%, up from 6.5% in October, surpassing expectations of 6.6% and marking the highest level since September 2021. This increase reflects a softening labor market, a concern previously noted by the Bank of Canada.
The number of unemployed individuals grew by 87,300, reaching 1,516,300, while employment increased by 50,500 to 20,647,400. The rise in unemployment was primarily due to more people entering the labor force, as evidenced by the labor force participation rate climbing 0.3 percentage points to 65.1%, a three-month high.
Unemployment rates increased across various age groups:
Youth (15-24 years): Up by 41,200, totaling 444,600 unemployed.
Core-aged (25-54 years): Increased by 24,200, reaching 828,100 unemployed.
Older individuals (55 years and over): Rose by 21,800, totaling 243,500 unemployed.
These figures indicate that the labor market is not generating enough jobs to accommodate the growing number of job seekers. Economists suggest that this trend may influence the Bank of Canada's upcoming interest rate decisions, potentially leading to a rate cut to stimulate economic activity.
Additionally, wage growth has moderated, with average hourly wages for permanent employees increasing at an annual rate of 3.9% in November, down from 4.9% in October. This deceleration aligns with the observed increase in labor market slack.
The uptick in Canada's unemployment rate, coupled with a higher labor force participation rate and moderated wage growth, suggests a cooling labor market. These developments are likely to be key considerations for the Bank of Canada's monetary policy decisions in the near future.
US Non Farm Payroll increased by 227,000, but unemployment rose to 4.2%
12/05/2024 03:00 pm EST
AJ Economy Trend - US Down with higher YoY unemployment change
Employment Trends
Total Job Gains: Nonfarm payroll employment increased by 227,000, a strong improvement from the prior month's gain of only 36,000.
Key Sectors with Job Gains:
Health Care: +54,000 jobs, with notable growth in home health care services (+16,000), hospitals (+19,000), and nursing/residential care facilities (+12,000).
Leisure and Hospitality: +53,000 jobs, particularly in food services and drinking places (+29,000).
Government: +33,000 jobs, primarily in state government (+20,000).
Social Assistance: +19,000 jobs, driven by individual and family services (+17,000).
Transportation Equipment Manufacturing: +32,000 jobs, reflecting the return of workers from strikes.
Sector with Job Losses:
Retail Trade: -28,000 jobs, with declines in general merchandise (-15,000) but gains in electronics/appliance retail (+4,000).
Unemployment Data
Unemployment Rate: Held steady at 4.2%, with 7.1 million unemployed people. This is higher than the 3.7% rate and 6.3 million unemployed from a year earlier.
By Demographic:
Blacks: Unemployment edged up to 6.4%.
Other groups (Whites, Hispanics, Asians, adult men, and women): No significant change.
Long-Term Unemployed: 1.7 million individuals, comprising 23.2% of all unemployed.
Labor Force Participation: Steady at 62.5%, consistent over the year.
Wages and Hours
Average Hourly Earnings:
Rose by 13 cents (0.4%) to $35.61.
Year-over-year increase: 4.0%.
Nonsupervisory employees saw wages rise by 9 cents (0.3%) to $30.57.
Average Workweek: Slight increase to 34.3 hours, with manufacturing overtime edging up to 2.9 hours.
Revisions to Past Data
September and October payroll numbers were revised up by a combined 56,000 jobs, highlighting continued strength in employment.
Initial Jobless claims increased 9,000 from previous week, continuous unemployment at 1.87 mil vs 1.76 mil in December 2023
12/04/2024 03:00 pm EST
AJ Economy Trend - US Down with higher YoY continuous jobless claim
Initial Claims (Week Ending November 30):
Advance Initial Claims: 224,000, an increase of 9,000 from the previous week's revised level of 215,000 (initially reported as 213,000).
4-Week Moving Average: 218,250, up by 750 from the prior week's revised average of 217,500.
Insured Unemployment (Week Ending November 23):
Insured Unemployment Rate: 1.2%, down by 0.1 percentage point from the previous week's rate.
Advance Insured Unemployment Number: 1,871,000, a decrease of 25,000 from the revised level of 1,896,000 in previous week (initially reported as 1,907,000).
4-Week Moving Average: 1,884,250, a decrease of 3,250 from the revised average of 1,887,500.
Yearly Comparison: Continuous Jobless Claim at 1,871,000 in November 2024 vs 1,759,000 in December 2023 a year ago
Fed Beige Book indicates slight growth but with consumers’ increased sensitivity to price and future economic challenges
12/04/2024 03:00 pm EST
AJ Economy Trend - US Neutral
In the latest Beige Book report, economic activity rose slightly in most Federal Reserve Districts, with modest or moderate growth in some areas offsetting flat or declining activity in others. Consumer spending remained stable but showed increased sensitivity to prices and quality, with declines in home furnishings and housing-related demand attributed to limited mobility and rate volatility. Capital spending was subdued, especially in farm equipment, while energy activity was flat, though electricity demand grew due to data center expansions. Employment levels were flat or slightly up, with subdued hiring and low layoffs. Wage growth softened but remained robust for entry-level and skilled positions. Prices rose modestly, with businesses struggling to pass costs to customers, and rising insurance prices were a notable pressure. Regional highlights included stable or slightly growing real estate markets, cautious optimism about future demand, and mixed expectations regarding tariffs and the incoming administration's policies. Overall, the outlook for growth and employment is moderately positive but tempered by sector-specific challenges and economic uncertainties.
ISM Services PMI Fell to 52.1 from 56 in October, well below forecast of 55.5 but remained in expansion territory
12/04/2024 12:00 pm EST
AJ Economy Trend - US Neutral
In November 2024, the ISM Services PMI fell to 52.1 from 56 in October, signaling the slowest growth in the U.S. services sector in three months and falling short of forecasts of 55.5. Declines were observed across business activity (53.7), new orders (53.7), employment (51.5), and supplier deliveries (49.5, indicating faster performance). Inventories (45.9) and backlogs (47.1) also decreased, while price pressures edged up slightly to 58.2. Respondents' outlooks were mixed, influenced by seasonality, election-related uncertainties, and tariffs, with cautious sentiment regarding potential industry-specific impacts. Despite the slowdown, the sector remains in expansion territory above the 50 threshold.
ADP Employment Report shows 146,000 jobs added in November, less than expectation of 163,000
12/04/2024 12:00 pm EST
AJ Economy Trend - US Down with lower jobs added
In November 2024, private sector employment grew by 146,000 jobs, driven by gains in service-providing industries (+140,000), particularly education and health services (+50,000), and large establishments (+120,000). Construction added 30,000 jobs, but manufacturing saw a decline (-26,000). Regionally, the South led growth (+61,000), while the Northeast and Midwest also contributed. Small establishments lost 17,000 jobs, offset by gains in medium and large firms. Pay growth continued, with job-stayers’ wages rising 4.8% year-over-year and job-changers’ pay increasing 7.2%. While the labor market remains resilient, growth is slowing, with weaknesses in manufacturing and financial services offset by strength in healthcare and hospitality.
7.7 million job openings in October 2024 but with only 5.3 million hires, down 941,000 and 501,000 from previous year
12/03/2024 3:00 pm EST
AJ Economy Trend - US Down with lower YoY job openings and hiring
In October 2024, the U.S. labor market remained stable with 7.7 million job openings, unchanged from September but down 941,000 from the previous year. Hires also held steady at 5.3 million, though they were 501,000 lower year-over-year. Total separations matched hires at 5.3 million, with quits increasing to 3.3 million, reflecting worker confidence, particularly in accommodation and food services. Layoffs and discharges remained unchanged at 1.6 million, with retail trade seeing slight increases and durable goods manufacturing experiencing declines. Despite steady conditions, the labor market shows signs of cooling compared to last year, with notable resilience in service-related industries driving activity.
ISM Manufacturing rose from 46.8% in October to 48.5% in November
12/02/2024 3:00 pm EST
AJ Economy Trend - US Neutral
ISM Manufacturing Index:
Rose to 48.4% in November, up from 46.5% in October.
Still below 50%, indicating continued contraction, but marks a five-month high.
New Orders:
Climbed to 50.4%, turning positive for the first time in months, suggesting some stabilization in demand.
Production:
Marginally improved to 46.8%, but remains in contraction territory.
Employment:
Rose to 48.1%, reflecting slight improvement but still indicating job losses.
Prices:
Fell to 50.3%, signaling inflation pressures have diminished to pre-pandemic levels.
Context and Challenges
Short-term rebound factors:
The increase likely reflects a recovery from disruptions in October due to hurricanes and the Boeing strike, rather than a structural turnaround.
Sectoral divergence:
Manufacturing struggles continue, but the broader U.S. economy remains supported by a strong services sector (details of which will emerge in the upcoming ISM services index).
Trepp CMBS Delinquency Report increasing overall delinquency rate to 6.4%, office sector reaching 10.38%
12/01/2024 3:00 pm EST
AJ Economy Trend - US Down with upward trending CMBS in delinquency rate
The Trepp CMBS Delinquency Report for November 2024 highlights notable increases across various property types, reflecting heightened stress in the commercial real estate market:
Overall Delinquency Rate:
Increased by 42 basis points to 6.40%.
Year-over-year increase of 182 basis points (4.58% in November 2023).
Six months ago, the rate was 4.97%.
Office Sector:
Delinquency rate soared past 10%, reaching 10.38% (up 101 basis points).
The sector accounted for 60% of the net increase in delinquent loan amounts due to multiple large loans becoming newly delinquent.
Multifamily Sector:
Delinquency rate rose sharply by 94 basis points to 4.18%.
The increase was driven by a large SASB loan default due to maturity issues.
Lodging Sector:
Delinquency rate increased 83 basis points to 6.92%.
Two significant SASB loans defaulted at maturity during the month.
Retail Sector:
Improvement seen, with the delinquency rate decreasing by 25 basis points to 6.57%.
Industrial Sector:
The delinquency rate remained stable at 0.32%, showcasing resilience.
Seriously Delinquent Loans:
Loans in foreclosure, REO, or non-performing balloons rose to 5.88%, a monthly increase of 33 basis points.
Additional Considerations:
Including loans beyond their maturity date but current on interest, the delinquency rate would rise to 8.01%, up 28 basis points.
Loans in the 30-day delinquent bucket increased to 0.52%, up 9 basis points.
Year-Over-Year Trends:
The largest increases were seen in:
Office: Up from 6.08% to 10.38% (+430 basis points).
Multifamily: Increased from 2.46% to 4.18% (+172 basis points).
Lodging: Rose from 5.21% to 6.92% (+171 basis points).
The overall delinquency rate remains well below the peaks of the Global Financial Crisis (10.34% in July 2012) and the COVID-19 era (10.32% in June 2020), but the upward trend raises concerns about the health of the commercial real estate sector, especially as maturity defaults mount.
This data underscores sector-specific challenges, particularly in office and multifamily properties, amidst broader economic pressures and shifting market dynamics.
US banks’ reported total unrealized losses of $512.9 Billion
11/30/2024 3:00 pm EST
AJ Economy Trend - US Down Mix due to high unrealized bond losses
As of the second quarter of 2024, U.S. banks reported total unrealized losses of $512.9 billion on their securities portfolios, marking a slight decrease from the previous quarter. This reduction is attributed to the sale of bonds by several large banks, which incurred substantial realized losses but helped offset the increase in unrealized losses due to rising interest rates.
The banking industry has now experienced ten consecutive quarters of elevated unrealized losses, a trend that began with the Federal Reserve's interest rate hikes starting in the first quarter of 2022. These losses primarily stem from holdings in residential mortgage-backed securities, whose values decline as interest rates rise.
The number of banks on the FDIC's "Problem Bank List" increased to 66 in the second quarter of 2024, up from 63 in the previous quarter. This list includes banks with a CAMELS composite rating of "4" or "5," indicating financial, operational, or managerial weaknesses that could threaten their viability if not addressed. Despite this increase, the proportion of problem banks remains within the normal range for non-crisis periods, representing 1.5% of total banks.
Notably, Bank of America reported the largest unrealized losses in the industry, with $85.7 billion in paper losses on its held-to-maturity bond portfolio as of the third quarter of 2024. This is a decrease from $110.8 billion in the previous quarter, largely due to declining interest rates. The bank has indicated that these losses will diminish over time as the bonds mature or are paid off.
In summary, while U.S. banks have seen a slight reduction in unrealized losses due to strategic bond sales and favorable interest rate movements, the persistence of these losses over multiple quarters highlights ongoing vulnerabilities in the banking sector. The increase in the number of problem banks further underscores the need for continued monitoring and proactive management to ensure financial stability.
