Comerica Bank’s California Index Gains

Comerica Bank’s California Economic Activity Index grew by 1.1 percentage points in October to a level of 125.4. October’s reading is 41 points, or 49 percent, above the index cyclical low of 84.1. The index averaged 119.8 points for all of 2015, six and two-fifths points above the average for all of 2014. September’s index reading was 124.3.

“Our California Economic Activity Index increased again in October, completing its ninth consecutive month without a decline. Positive stock market performance through the fourth quarter of 2016 is expected to keep the California Index growing at a moderate-to-strong rate through year-end. In addition to the October increase in the NASDAQ 100 Technology Stock sub-index, other components were generally favorable. Payroll employment, state exports, housing starts, home prices and hotel occupancy were also positive contributors for the month. Unemployment insurance claims (inverted) and defense spending eased in October,” said Robert Dye, Chief Economist at Comerica Bank. “We expect to see a strong dollar through 2017, supported by policies from the incoming Trump Administration. California is exposed to downside risks as a result of the potential for international trade disputes and a strong dollar; however, these risk factors may be offset by stronger domestic economic performance.”

For a PDF version of the  California Economic Activity Index click here: CaliforniaIndex_1216.

 

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December ISM-MF Index, November Construction Spending

Good Start for 2017, Major Uncertainties Ahead With Incoming Trump Administration

  • The ISM Manufacturing Index for December increased to 54.7, showing improving conditions.
  • Construction spending increased by 0.9 percent in November.

The ISM Manufacturing Index for December increased again to a solid 54.7, indicating improving conditions for U.S. manufacturers. This stands in contrast to expectations for cooler auto sales in 2017 and for cooler commercial aircraft orders. It also counters, at least in the near-term, concern about the strong dollar and potential for increasing dollar strength in 2017. Since dipping below the break-even 50 mark in August, the ISM Manufacturing Index has now registered four consecutive monthly gains, climbing back to a moderately strong 54.7 for December. The details in the December report are solid. The new orders sub-index jumped from 53.0 in November to 60.2 in December. Production also jumped to 60.3 and employment increased as well, to 53.1. Out of 18 reporting industries, 11 reported growth in December, including petroleum and coal products, primary metals, food and beverages, tobacco and apparel. Six industries reported contraction at year end, including plastics and rubber products, furniture, printing and textiles. Anecdotal comments were positive with most industries reporting strong demand through early 2017.

Construction spending for November increased by 0.9 percent as all three major segments reported gains. Private residential construction spending was up by 1.0 percent for the month, supported by new single-family construction. Private nonresidential construction spending gained 0.9 percent with gains in office construction. Total public construction spending was up by 0.8 percent in December, with a 1.1 percent increase in highway and street projects.

Good economic data and rising oil prices are supporting a good start to 2017 for U.S. equity markets. The price for West Texas Intermediate crude oil is close to $53 a barrel. Kuwait and Oman both announced production cuts, signaling that OPEC is at least taking the right first steps in attempting to reign in production in order to stabilize international oil markets. Looking ahead, we expect to see major announcements from the incoming Trump Administration early this year on tax reform, healthcare, regulatory rollback, fiscal stimulus and trade agreements. We expect the reflating U.S. economy to show a little stronger growth, more inflation, higher interest rates and a strong dollar in 2017.

Market Reaction: U.S. equity markets opened with gains. The yield on 10-Year Treasury bonds is up to 2.46 percent. NYMEX crude oil is down to $52.90/barrel. Natural gas futures down to $3.34/mmbtu.

For a PDF version of this Comerica Economic Alert click here: ISM-MF 01-03-17.

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Comerica Economic Weekly

U.S. economic data for the week was mixed. Most data was positive and consistent with near-3 percent real GDP growth for the fourth quarter. However, two data points for November were worse than expected, retail sales and housing starts. It appears that both data sets were quirky. However, they are reminders that the post-election surge in business and consumer confidence is not enough to support a lift to our fairly low potential GDP growth track. Post-election buoyancy in the U.S. economy will need to be supported by real action from the incoming Trump Administration. We expect to see meaningful tax reform and spending programs announced early this spring that will rationalize current expectations for stronger growth in 2017.

Also this week, the Federal Reserve announced only the second fed funds interest rate hike since July 2006. The commentary in the policy statement indicated that the Fed is feeling a little more positive about the U.S. economy at the end of this year. The economic projections of FOMC members also show that they are feeling a little more positive about the U.S. economy for next year.

The new “dot plot” released on Wednesday is consistent with three fed funds rate hikes in 2017. It is not a firm commitment to three rate hikes and it does not give us any information about the expected timing of rate hikes through the year. Right now it looks reasonable to expect that the FOMC will pause at their next meeting over January 31/February 1 and look at the data. March 14/15 also feels a little soon for the next rate hike. So we will be listening to the commentary by Fed officials after the winter holidays to see if their focus is coalescing on May 2/3 or June 13/14 for the next fed funds rate hike.

The motivation for the Fed for monetary policy tightening over 2017 will be inflation. We can think of inflation coming from two directions. One direction is the cost-push side, the other is the demand-pull side. Cost-push inflation is warming up as commodity markets reset. OPEC has reached an agreement to cap oil production and major non-OPEC producer Russia has agreed to cooperate and cap its production. This does not immediately resolve the global glut of oil, but it does suggest that excess inventories may be absorbed more quickly, supporting firmer oil prices sooner. Other commodities prices have also firmed up recently, including iron ore. Demand-pull inflation comes as businesses and consumers compete against each other for scarce resources, including labor. With the U.S. unemployment rate already low at 4.6 percent in November, any potential boost to the economy from Trump Administration policies, including tax reform and fiscal stimulus, would be expected to tighten labor markets further, tending to boost wages and other input prices.

The Fed will be watching inflation indicators closely this spring. There is potential for the Fed to tighten policy, providing a “monetary offset” to new fiscal policy.

For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here:  cmaeconweekly-12-16-2016.

 

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November Consumer Prices, Dec. UI Claims, NY Fed, BOE

No Surprises from Today’s Data as We Wind Down Economics Publications for the Year

  • The November Consumer Price Index increased by 0.2 percent, boosted by energy prices.
  • Core CPI also increased by 0.2 percent, and was up 2.1 percent over the previous 12 months.
  • The Bank of England voted to maintain their key lending rate at 0.25 percent and continue buying assets.
  • Initial Claims for Unemployment Insurance fell by 4,000 to hit 254,000 for the week ending Dec. 10.
  • The Federal Reserve Bank of New York’s Empire State Manufacturing Index increased in December.

Consumer price inflation was moderate in November as the headline CPI increased by 0.2 percent, about as expected. Gains in energy prices countered declines in food and apparel. The energy prices index was up by 1.2 percent in November. According to AAA, the national average gasoline price increased to $2.226 per gallon for today, up from their November average price of $2.157, suggesting that energy will boost the Consumer Price Index again in December. Over the 12 months ending in November, the headline CPI is up by 1.7 percent, well above the 0.4 percent year-over-year gain from last November. We expect to see a gradual increase in crude oil and refined product prices through 2017. The recent production agreement by OPEC sets the stage for a rebalancing of global oil supply and demand by the end of 2017, as long as production caps are adhered to. The core CPI (all items less fuel and energy) increased by 0.2 percent in November. Over the previous 12 months, core CPI is up by 2.1 percent. House prices and rents are still going up consistently and this supports core price gains. However, some markets are increasing multifamily housing supply very quickly, suggesting that rents may not increase as much next year. Inflation indicators will be watched carefully by the Federal Reserve next year as they plan to accelerate interest rate hikes. We had one fed funds rate hike at the end of 2015 and one at the end of 2016. According to the Fed’s new dot plot, released yesterday, they expect to approve three 25 basis point rate hikes spread across eight FOMC meetings in 2017.

The Bank of England voted today to maintain their key lending rate at 0.25 percent and to continue their asset purchase program. Over the next year, as the Federal Reserve tightens monetary policy in the U.S., it will be very instructive to watch other central banks as they converge with, or diverge from, Federal Reserve policy. This will be meaningful for the value of the dollar relative to other currencies, and will be a determining factor in our trade balance and overall GDP growth. We expect to see more strengthening of the dollar in early 2017 as a result of divergent monetary policy.

Labor market indicators in December continue to look good. Initial claims for unemployment insurance fell by 4,000 to reach 254,000 for the week ending December 10. Continuing claims gained 11,000 to hit 2,018,000 for the week ending December 3. Regional manufacturing indicators are improving. The New York Fed’s Empire State Manufacturing Index climbed from mildly to moderately positive for December.

This will be the last daily economic alert that we issue this year. We will publish the Comerica Economic Weekly tomorrow for the last time this year. We are looking forward to some much needed holiday time with friends and family, and we hope that you can enjoy the same. We will be back in early January.

Market Reaction: Equity markets opened with gains. The 10-Year Treasury bond yield is up to 2.60 percent. NYMEX crude oil is down to $50.58/barrel. Natural gas futures are down to $3.53/mmbtu.

cpi-12-15-16

For a PDF version of this Comerica Economic Alert click here: cpi-12-15-16.

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Federal Reserve Monetary Policy

Fed Raises Short-Term Interest Rates 25 Basis Points As Expected

  • As widely expected, the Federal Reserve raised the target range of the fed funds rate by 25 basis points.
  • The vote of the Federal Open Market Committee was unanimous.
  • The new Dot Plot is consistent with three 25 basis point rate hikes in 2017 and 2018.
  • In her press conference Janet Yellen said that she intends to serve out her term as FOMC chair.

At the conclusion of the regularly scheduled Federal Open Market Committee meeting this afternoon, the FOMC announced that they are raising the range of the federal funds rate by 25 basis points to 0.50 – 0.75 percent. They are also raising the discount rate from 1.00 to 1.25 percent. The vote in the FOMC for these moves was unanimous. Today’s policy actions were widely anticipated by financial markets, and are not expected to result in any significant dislocations. The Fed’s announcement said that the economy has been expanding at a moderate pace since mid-year and labor market conditions continue to strengthen. According to the Fed, inflation indicators have moved up considerably, but are still below the 2 percent target. The announcement also said that the Fed will continue to reinvest principle payments from its assets and roll over maturing securities.

In addition to the policy announcement, the FOMC also released a new set of economic projections and a new “dot plot.” The economic projections show a slight increase in expected real GDP growth for 2017, and a slight decrease in the expected unemployment rate. Inflation expectations were unchanged from September. The new dot plot, which shows FOMC member’s expectations for the fed funds rate over the next few years, indicates that the FOMC now expects to raise the fed funds rate three times in 2017 and three times in 2018. It is purely speculative on our part to say that a reasonable pattern for the timing of fed funds rate increases for 2017 might be March 15, July 26 and December 13 of 2017. We will be adjusting our interest rate forecast for 2017 and 2018 upward slightly, based on today’s news from the Fed.

In her press conference, Janet Yellen indicated that her policy of data dependence would continue. That is to say that the fed funds rate is not on a predetermined course and that economic conditions could change and expectations of future interest rate hikes could change as well. She was careful not to specifically endorse a potential Trump Administration fiscal stimulus plan or tax reform strategy. Moreover, she was careful to restate previous statements about running a “hot economy.” She does not recommend letting the economy expand at a rate significantly above potential GDP growth for a period of time in order to absorb remaining slack. She restated her view that the Federal Reserve would eventually wind down its balance sheet by not reinvesting principle payments and rolling over maturing assets once the fed funds rate was well on its way toward normalization. We believe that condition will not be satisfied until late 2017 at the earliest, and more likely later.

Market Reaction: Equity markets dipped on the Fed news. There may be some feeling that Yellen’s apparent walk back of her “running the economy hot” statement could indicate that the potential for a “monetary offset” to new fiscal policy (that is to say, higher interest rates) could potentially limit the lift from fiscal stimulus. Also there is increasing commentary about the potential for a flattening of the yield curve, which could be an early warning signal for the next recession. We think that it is premature to incorporate that view into our near-term forecast. The 10-year Treasury yield is up to 2.56 percent. NYMEX crude oil is down to $50.89/barrel. Natural gas futures are up to $3.56/mmbtu.

For a PDF version of this Comerica Economic Alert click here: fomc-12-14-16.

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November Retail Sales, Industrial Production and Producer Prices

 Holiday Sales, Ho Ho No?

  • November Retail Sales increased by just 0.1 percent.
  • Industrial Production fell by 0.4 percent in November as utility output dropped.
  • The Producer Price Index for Final Demand increased by 0.4 percent in November.
  • The Federal Reserve is widely expected to raise the fed funds rate range today, for the first time in a year.

Retail sales were weaker than expected in November, increasing by just 0.1 percent. The monthly retail sales survey includes e-commerce. The soggy November numbers call into question our expectation for a good holiday shopping season. It looks like everything is lining up in support of consumers warming up the plastic this season. Job growth has been good, wages are increasing, stock prices are buoyant, home prices are up, consumer confidence is rising, yet retail sales in November barely budged. Over the past 12 months, total retail sales are up a moderate 3.8 percent. Non-store retailers as a group are doing better, with sales up 11.9 percent over the year. In November, the monthly totals were held down by motor vehicle and parts sales, which declined by 0.5 percent, consistent with the dip in unit auto sales from an 18.0 million unit pace in October, to 17.9 million in November. Retail sales excluding autos increased by 0.2 percent in November. Most categories reported decent gains. However, clothing store sales were unchanged, possibly due to the warm November weather. Sporting goods sales fell by 1.0 percent for the month, probably not just due to the late start to the pond hockey season. General merchandise stores gained a sedate 0.1 percent for the month.

Warmer-than-normal weather also showed up in the industrial production data for November. Total IP fell by 0.4 percent, dragged down by utility output, which declined by a hefty 4.4 percent with the warm weather. Output for mining industries increased by 1.1 percent in November, as the drilling rig count continued to improve. Output for manufacturing industries dipped by 0.1 percent as auto assemblies declined from a 12.33 million unit pace in October, to 11.91 million in November. Overall industrial production has flattened out in the U.S. over the last year, held in check by stabilizing auto sales and declining oil field activity. We expect IP to stay flattish over the next year as auto sales gradually ease and drilling activity slowly increases.

Producer prices increased by more than expected in November. The PPI for final demand gained 0.4 percent, boosted by trade services, which was driven by higher margins at wholesalers and retailers. Food prices were up by 0.6 percent as beef and fresh fruit prices climbed. Over the last 12 months, the PPI for final demand is up by 1.3 percent. We expect that year-over-year comparison to continue to increase through early next year.

This afternoon we expect the Federal Reserve to announce a 25 basis point increase in the fed funds rate range. This should come as no surprise to anyone on the planet. We will be looking for any changes to forward guidance from the Fed and for any shifts in their expectations for next year.

Market Reaction: Equity markets dipped on the softer retail sales report. The 10-year Treasury yield is down to 2.43 percent. NYMEX crude oil is down to $52.14/barrel. Natural gas futures are up to $3.50/mmbtu.

retailsales-12-14-16

For a PDF version of this Comerica Economic Alert click here: retail-sales-12-14-16.

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Comerica Economic Weekly

It was a lighter week for U.S. data, but there was an important monetary policy announcement from the European Central Bank, and U.S. trade data has implications for fourth quarter GDP.

 The European Central Bank left its key policy interest rates unchanged, near zero, and in the case of its deposit rate, at -0.4 percent. President Mario Draghi announced that asset purchases would extend beyond March 2017, but at a reduced pace of 60 billion euros per month. Draghi indicated that asset purchases were likely to continue through the end of 2017. The euro had been strengthening against the dollar in late November, but reversed course, weakening after the ECB announcement. At 1.06 euros to the dollar, parity is not far away.

The U.S. international trade deficit widened in October to -$42.6 billion. The inflation-adjusted balance of trade in goods fell to -$60.3 billion for the month, below the third quarter average, meaning that trade is on course to be a drag on GDP growth for the fourth quarter.

The ISM Non-Manufacturing Index for November increased to 57.2, showing that the service sector performed well for the month. Both the ISM Non-Manufacturing Index and the Manufacturing Index improved in November, consistent with near-3-percent real GDP growth for the fourth quarter.

The job openings rate for October was steady at 3.7 percent, a good number. Hiring and separation rates were also unchanged for the month. Initial claims for unemployment insurance fell by 10,000 for the week ending December 3, to hit 258,000. Continuing claims fell noticeably by 79,000 for the week ending November 26, to hit a very low 2,005,000.

We continue to expect the Federal Reserve to increase the effective range of the fed funds rate by 25 basis points on Wednesday, December 14. The fed funds futures market places an implied probability of 97.2 percent on the event. Fed officials have done nothing to counter the very strong market expectation.

The most interesting new element of the Fed’s upcoming policy announcement will be how it guides expectations for 2017. We will get a new set of economic forecasts from the Fed on Dec. 14, and a new dot plot. The dot plot shifted down through 2016. We will watch to see if it shifts again next week.

For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: cmaeconweekly-12-09-2016.

 

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December 2016, Comerica Economic Outlook

After a Weak Start, U.S. Economy Set to Finish 2016 on a Stronger Note

The recent upward revision to Q3 real GDP growth, to 3.2 percent, is a look in the rear-view mirror, but it does suggest that the U.S. economy entered the soon-to-be-complete fourth quarter with more momentum than previously thought. Inventories remain a key factor in the GDP calculation. Inventory accumulation was strong in 2015 and supported a moderate 2.6 percent real GDP growth for the year. In 2016, inventory accumulation was much weaker. In fact in the second quarter of 2016, inventories declined by $15 billion (nominal), the first decline in inventories since 2011Q3. Oil inventories were part of the story, as were manufactured goods. We expect U.S. oil stocks to continue to decline through 2017, but at a slower rate than they did this summer. Also, with firmer oil prices, and firming drilling activity, we expect that manufacturers who supported the oil and gas industry will have better control over their inventories in 2017 than they have for the past two years. In our U.S. forecast, inventories contribute positively to GDP growth from 2016Q3 through 2017Q4. This is a major assumption, and it could prove to be wrong, but if it is correct, it will result in above-potential GDP growth through 2017. There are several significant risks to our inventory outlook. U.S. crude oil inventories may fall through 2017 faster than expected. Lower oil prices could result in weaker-than-expected drilling activity. A strong dollar could stifle U.S. exports, as could the fallout from any challenges to existing trade deals. Finally, the auto sector is in play. We expect U.S. auto sales to gradually ease through 2017. If auto sales are worse than expected, auto-related manufacturers could reduce their inventories significantly.

Beyond GDP, other U.S economic metrics improved late in the year. The ISM-Manufacturing Index increased from a mildly contractionary 49.4 in August, to a moderately positive 53.2 in November. Despite the concern about the strong dollar and adverse consequences of trade negotiations, U.S. manufacturers are finishing the year with some momentum. The ISM Non-Manufacturing Index is also showing more momentum, having increased from its August low of 51.4 to November’s strong 57.2. Taken together, the two indexes are consistent with real GDP growth in the neighborhood of 3 percent or more in the fourth quarter.

Add a post-election stock market rally and rising consumer confidence into the mix and 2016 looks to end on a good note, which should carry over into early 2017. As the incoming Trump Administration launches its 100-day plan, we expect to see policy measures designed to boost economic growth, including some form of fiscal stimulus and corporate tax reform. These should help to sustain economic momentum through 2017. With stronger GDP growth and a widening federal deficit, inflation expectations should firm up through 2017. Oil markets will also factor into inflation expectations. The recent OPEC agreement to cut production is more marginal than radical, but it should support slightly higher prices. Stronger inflation, in turn, is an upside risk factor for our interest rate outlook. We continue to expect the Federal Reserve to increase the feds funds rate range by 25 basis points on December 14. We have maintained our call for two more interest rate hikes in 2017. However, we recognize that there is increasing upside risk to our interest rate forecast for 2017 and 2018, which needs to be balanced against the probability of recession in a late-cycle economy.

For a PDF version of the complete Comerica U.S. Monthly with additional commentary, tables, and charts, click here: useconomicoutlook1216.

 

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Comerica Economic Weekly

Since we had the holiday week last week, we will cover two weeks’ worth of U.S. economic data, which has been generally favorable.

Expectations for the official payroll job numbers for November were boosted by a stronger-than-expected ADP Employment Report, which showed 216,000 private sector jobs added in November. The official BLS payroll report did not quite get there, showing 178,000 net new jobs added to the U.S. economy in November. The unemployment rate dropped more than expected, down to 4.6 percent from October’s 4.9 percent. Average hourly earnings dipped by 3 cents in November after gaining 11 cents in October. Over the previous 12 months, average hourly earnings were up by 2.5 percent. Average weekly hours were unchanged at 34.4.

Initial claims for unemployment insurance for the week ending November 26 increased by 17,000, to hit a still-low 268,000. Weekly data around holidays is always suspect due to seasonal adjustment.

Third quarter real GDP was revised to show an annualized growth rate of 3.2 percent, up from the initial estimate of 2.9 percent. We expect to see a similar near-3-percent growth rate for the fourth quarter when that data is published at the end of January.

The Conference Board’s Leading Economic index increased by 0.1 percent in October. We expect to see a stronger gain in November.

Real disposable income increased by a solid 0.4 percent in October. Real consumer spending gained 0.1 percent. The 12-month change in the personal consumption expenditure (PCE) price index increased to 1.4 percent, showing that the rate of inflation is warming up.

Auto sales for November were better than expected, dipping slightly to a 17.9 million unit sales rate as domestic truck sales eased.

Consumer confidence jumped in November. The Conference Board’s Consumer Confidence Index increased from 100.8 in October to 107.1. This is good news for fourth quarter consumer spending.

Existing home sales for October increased by 2.0 percent to hit a 5.6 million unit annual rate. The months’ supply of existing homes for sale dipped to 4.3 months’ worth, indicating tight conditions in most U.S. markets. New home sales for October eased by 1.9 percent to a 563,000 unit rate. The months’ supply of new homes for sale increased to 5.2 months’ worth, up from the July low of 4.6 months’ worth. Home prices increased more than expected in September. The Case-Shiller U.S. National House Price Index was up 0.8 percent in September (after seasonal adjustment) and was up 5.5 percent over the previous 12 months. Recent increases in home mortgage rates will be a headwind for first-time buyers.

Total construction spending increased by 0.5 percent in October, boosted by a 2.8 percent increase in spending on public projects.

The ISM Manufacturing Index for November firmed up to 53.2 percent, indicating improving conditions for U.S. manufacturers. New orders for durable goods increased by 4.8 percent in October with large gains in the typically volatile aircraft categories, both civilian and military. The “core” category, nondefense capital goods excluding aircraft, increased by 0.4 percent for the month.

The minutes of the November 1-2 Federal Open Market Committee meeting reinforced expectations for a 25-basis-point increase in the fed funds rate range at the next FOMC meeting, coming up over December 13-14. We expect to see a rate hike on December 14. We look for two more in 2017. However, the early speculation about Trumponomics suggests that the risk to our interest rate outlook for 2017 and 2018 is shifting to the upside.

For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: cmaeconweekly-12-02-2016.

 

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November U.S. Employment

Positive Jobs Report Sets the Stage for December 14 Rate Hike

  • Payroll Employment increased by 178,000 jobs in November.
  • The Unemployment Rate for November dropped to 4.6 percent.
  • Average Hourly Earnings decreased by 0.1 percent for the month, after a strong increase in October.
  • Average Weekly Hours were unchanged at 34.4 in November.

Expectations for the official payroll job numbers for November were boosted by a stronger-than-expected ADP Employment Report released on Wednesday. We did not quite get there, but the 178,000 net new jobs added to the U.S. economy in November is a solid number. Moreover, the unemployment rate dropped more than expected, down to 4.6 percent from October’s 4.9 percent. This is the lowest unemployment rate seen since August 2007 and it puts us within putting distance of the low for the previous cycle of 4.4 percent, which we hit three times from late 2006 through mid-2007. The large drop in the unemployment rate came as the household survey of employment increased by 160,000 for the month, and the labor force decreased by 226,000 after falling by 195,000 in October. Despite the last two monthly declines, the year-over-year trend in the labor force is increasing, showing that the labor market is still broadening. Average hourly earnings dipped by 3 cents in November after gaining 11 cents in October. Over the previous 12 months, average hourly earnings were up by 2.5 percent. Average weekly hours were unchanged at 34.4.

Establishment data for November was mostly positive but there were a couple of head-scratchers. Mining and logging employment increased by 2,000 jobs with help from oil and gas extraction, consistent with a gradual increase in the rig count. Construction added 19,000 jobs. Manufacturing employment dipped by 4,000 jobs with losses in durable goods industries. Wholesale trade added 2,800 net new jobs. Retail trade surprisingly lost 8,300 jobs in November. Transportation and warehousing gained 8,900 jobs. Information industries dropped 10,000. Finance gained 6,000 jobs for the month. Gains in professional and business services were strong at 63,000 net new jobs. Education and healthcare added a solid 44,000 jobs. Leisure and hospitality served up 29,000 jobs. The government sector was strong, adding 22,000 net new jobs in November.

Labor market data looks good. We see no reason why the Federal Reserve will not follow through on the widely expected 25 basis point increase to the fed funds rate range on December 14. The fed funds futures market places the implied odds of a December 14 rate hike at about 95 percent.

Market Reaction: U.S. equity markets opened with gains. The 10-Year T-bond yield is down to 2.38 percent. NYMEX crude oil is up to $51.18/barrel. Natural gas futures are down to $3.50/mmbtu.

employment-12-2-16

For a PDF version of this Comerica Economic Alert click here: employment-12-02-16.

 

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