Succinct Summation of the Week's Events

Succinct Summation of the Week’s Events:

Positives,

1)Payrolls grew by 227k, just above the estimate of 220k with the private sector contributing 194k of them. The prior two months were revised up by a combined 56k. On the wage side, average hourly earnings rose by .4% m/o/m, one tenth above expectations and are higher by 4% y/o/y. Hours worked ticked up by one tenth to 34.3 as expected but remains just off the lowest level since 2011 not including Covid. Combine the two and wages rose .7% m/o/m (after .1% rise in October) and by 3.7% y/o/y. Smoothing out the storms/strikes influence on October, the 3 month job gain average is 173k vs the 6 month average of 143k, the 12 month average of 190k and the 2023 average of 251k.

2)Continuing claims, delayed by a week but subject to seasonal issues depending on the timing of Thanksgiving (early last year, later this year), totaled 1.871mm which is down from a revised 1.896mm in the week before which was just below the highest since November 2021.

3)Job openings in October totaled 7.744mm, 225k above expectations after dropping to 7.372mm in September which was the least since January 2021 and vs 7.861mm in August. The number of quits did pick up though with the rate at 2.1% vs 1.9% in September and 2% in August, helped by the public sector.

4)The December UoM consumer confidence index rose to 74 from 71.8 and just above the estimate of 73.2. That’s also the highest since April. The internals were unusual though as Current Conditions jumped by almost 14 pts but Expectations fell by 5.3 pts. One year inflation expectations bounced to 2.9% from 2.6% but fell one tenth to 3.1% for the 5-10 year guess. Of note here, this happened even though more people think gasoline prices will drop. Tariffs are a consumer worry, mostly by Democrats and Independents said the UoM. Again too relative to November, one’s political association completely drove the sentiment answers. Democrats confidence fell another 10.4 pts after dropping by 10 last month after the election. Republicans on the other hand saw confidence jump by 12.8 pts in November and by another 12.5 pts in December. The employment component fell by 9 pts to a 4 month low and a key reason why the Expectations component fell. Within that, those that expect higher unemployment in the coming year rose to match the highest level since December 2022. Those expecting Higher Income fell 2 pts after rising by 3 last month. The % of those that think income will beat inflation over the coming 5 years fell to a 5 month low. There was a jump in spending intentions for homes, autos and a major appliance and that helped to juice the Current Conditions component but the UoM said this, “Rather than a sign of strength, this rise in durables was primarily due to a perception that purchasing durables now would enable buyers to avoid future price increases.” I bolded for emphasis since I didn’t write about it earlier today and again, this was mostly Democrats that said this. As many are answering questions based on their politics rather than their personal situation is making this anecdotal survey not very helpful.

5)US vehicle sales in November numbered 16.5mm at a seasonally adjusted annualized rate which was above the estimate of 16.1mm. That compares with 15.32mm in November 2023 and 17.09mm in November 2019.

6)ISM said its November manufacturing index was 48.4, remaining below 50 but that was above the estimate of 47.5 and up from 46.5 in October. This index has been 50 or above (in March at 50.3) once since October 2022. Notwithstanding the lift in manufacturing confidence, overall breadth worsened with just 3 industries seeing growth vs 5 in October. Similar to last month, 11 reported a contraction with the balance seeing no change.

7)Apartment List released its November new lease data last week and due to the slow seasonal time prices fell .8% m/o/m. The y/o/y drop was .6%. Supply, particularly in the Sunbelt states, continues to rise and the vacancy rate rose to 6.8%, up one tenth and that is the most since Covid began.

8)With the drop in mortgage rates to 6.69% w/o/w from 6.86% for an average 30 yr, that helped to lift purchase applications by 5.6% w/o/w according to the MBA after a 12.4% rise last week. The holidays though are a distortive seasonal influence on these figures so keep that in mind. Refi's were flattish, down .6%.

9)From Dollar General: "On the top line, while our core customer remains financially constrained, our results came in near the high end of our expectations for the quarter...we continue to grow market share in both dollars and units in highly consumable products sales during the quarter and also grew market share in non-consumable product sales."

10)From Kroger: "Customer spending habits continue adjusting to current macroeconomic factors. As inflation normalizes, our premium and mainstream households are feeling more confidence and are returning to their pre-pandemic shopping patterns more quickly. Mainstream households are the primary driver of our positive customer engagement trends. While overall consumer sentiment remains low, expectations are improving which positions us well for the holidays and into next year."

11)From Signet Jewelers: "we continue to drive sales momentum with our 6^th consecutive quarter of sequential same store sales improvement as we navigate a choppy consumer and industry environment this year."

12)From Lululemon: "We are pleased with our business over the extended Thanksgiving weekend and the traffic trends we saw across both our store and e-commerce channels. In fact, on Black Friday, we had the most visits ever to our shop app and e-commerce site."

13)From Ulta Beauty: "As we shared on our last call, we are navigating a number of headwinds, including the normalization of the US beauty category, a dynamic consumer environment, and elevated competition, particularly in prestige beauty. We are starting to see benefit from actions we are taking to reinforce our market position and improve our performance. And while the headwinds have not abated, we are making progress."

14)From Hewlett Packard Enterprises: "Overall, customer conversations indicate higher IT spending in 2025 with multiple tailwinds that should contribute to revenue growth. We expect continued recovery in traditional compute and growing adoption of AI systems by enterprises and sovereigns, although we expect orders to remain competitive and lumpy."

15)From Microchip Technologies: "In our data center end market for the 3rd quarter, we achieved record revenue of $1.1 billion, growing 98% y/o/y and 25% sequentially...We are seeing strong custom AI demand continue into the fourth quarter and have secured supply chain capacity to support our customers' growth forecasts."

16)It is still early about what the revenue potential will be but Salesforce was all bulled up over its Agentforce product.

17)The Bank of Japan was given another reason to hike rates in a few weeks after October base pay came out and it rose 2.7% y/o/y, up from 2.5% in the month before and that is the fastest rate since 1992.

18)The private sector focused Caixin reflected a lift in manufacturing to 51.5 from 50.3 and the services side comes out tomorrow. Caixin said "Demand for consumer goods was particularly strong. External demand bounced back, due partly to some overseas clients upping purchases after the US election, pushing the indicator into positive territory for the first time in four months."

19)Elsewhere in the region with the manufacturing PMI's, they mostly rose. South Korea 50.6 vs 48.3, Taiwan 51.5 vs 50.2, Vietnam 50.8 vs 51.2, Thailand 50.2 vs 50, Malaysia 49.2 vs 49.5, Indonesia 49.6 vs 49.2 and the Philippines 53.8 vs 52.9. Japan's and Australia's were left unrevised at 49 and 49.4 respectively. India's final read was 56.5 vs 57.3 initially and vs 57.5 in October.

20)The UK economy is doing a bit better than its European peers as its services PMI held above 50 at 50.8 though down from 52 in the month before. Some stagflation here too as S&P Global said "Higher salary payments meanwhile contributed to a sharp and accelerated increase in input prices, with the rate of cost inflation the fastest since April." Also, in terms of the overall outlook, "Worries about the impact of policies announced in the Autumn Budget, in particular those pushing up employment costs, were widely reported as leading to a gloomier assessment of business investment prospects and the broader UK economic outlook."

Negatives,

1)The negative in the payroll report was the household survey with a 355k job loss and combined with a drop of 193k in the size of the labor force, the unemployment rate rose one tenth to 4.2% (with another few decimal points it would have been 4.3%). Of the 355k job decline, 204k lost came from the key 25-54 yr old cohort and 194k from those aged 55 and over. The participation rate was a fly here too, falling to 62.5%, matching the lowest since January 2023. That said, it held at 83.5% for those aged 25-54. Confirming around the highest level of continuing claims since November 2021, the average duration of unemployment rose to 23.7 weeks and that is the most since April 2022.

2)Initial jobless claims rose to 224k from 215k and that was 9k more than expected and last week was revised up by 2k. Around the holidays is always a quirk with this data so I won’t make anything of the lift just yet.