Succinct Summation of the Week's Events

Succinct Summation of the Week’s Events:

Positives,

1)Within the October jobs data, average hourly earnings were as expected when including revisions and the y/o/y gain was 4% which compares with the pre Covid pace of 2.5%. Hours worked ticked up by one tenth to 34.3, still hovering around multi year lows, not including Covid.

2)Helped by a big seasonal adjustment lift, ADP said the US private sector added a net 233k jobs in October, about double the estimate of 111k and vs 159k in September which was revised up by 16k. There was almost no job growth for small businesses with employees under 50 but jumps for medium and large companies. On the pay side, wages for ‘job stayers’ rose by 4.6% y/o/y vs 4.7% in the month before. For ‘job changers’, pay was up 6.2% y/o/y vs 6.6% in September.

3)Initial claims fell to 216k, 14k below expectations and down from 228k in the week before. I’m not sure now what impact the recovery from the hurricanes is having in certain states. Smoothing it out, the 4 week average fell to 237k from 239k. Still elevated, though off the highest level in 3 years, continuing claims fell to 1.862mm from 1.888mm.

4)The headline September PCE gain was .2% m/o/m and the core rate was higher by .3% (and August was revised up by one tenth to a .2% gain), about as expected. The y/o/y increases were 2.1% and 2.7% y/o/y vs 2.3% and 2.7% in the month before. Lower energy prices kept a lid on the top line, partly offset by another gain in food. Also, services inflation continued on, offsetting the deflation in goods prices.

5)With regards to Q3 GDP, it was about as expected at 2.8% and driven by a 3.7% rise in consumption which added 246 bps to that figure. Within consumption was a jump in durable goods spending which added 60 bps to GDP, with almost half being motor vehicles. Spending on services added 120 bps. The other area of GDP growth was from government spending, contributing 85 bps to GDP with national defense making up 50 bps of that. Elsewhere, there was no growth. Trade was a detraction of 56 bps, inventories subtracted just under 20 bps and gross private domestic investment was flat. The only bright spot in this last category was 56 bps added by spending on equipment which I’d guess is related to AI data center buildouts. There was no contribution from spending on intellectual property as AI spend is stealing from other CapEx. Residential construction took off 20 bps from GDP.

6)September personal Income growth was as forecasted, up by .3% while spending was up .5% m/o/m, one tenth above expectations. Spending growth was evenly split between goods and services.

7)The Q3 Employment Cost Index rose .8% q/o/q vs the estimate of .9%. It was up 3.9% y/o/y. Specifically private sector wages and salaries rose .8% q/o/q and 3.8% y/o/y which is further moderation but in part due to tougher comps. They rose 4.5% in Q3 2023 to highlight. In Q3 2019, private sector wages and salaries grew by 3% y/o/y, for perspective.

8)With the average 30 yr mortgage rate in September falling all the way down to about 6.15% (now back to 6.73%), the lowest in a year and a half, home buyers stepped up according to the National Association of Realtors in today’s pending home sales figure which rose 7.4% m/o/m, well above the estimate of 1.9%. Sales were up 2.2% y/o/y.