As we head into the last few weeks of the year, here are a few points to keep in mind about the economy and markets.
Those are the key factors to know for the rest of this year and into 2017.
Analysts took what they wanted from last week’s Employment Situation reports, because both good and bad results were in there. The unemployment rate had a sharp decline to 4.6%, but that’s largely because of a drop in the labor force participation rate. The number of jobs created came in around expectations. The big disappointment in the report is a decline of 0.1% in average hourly earnings and no change in the average work week. The dip in earnings is the first in 2016 and makes the year-to-date growth only 2.5%. Household earnings growth and spending have been the main supports of the economy.
The JOLTS (Job Openings and Labor Turnover Survey) is more detailed than the monthly Employment Situation reports but is a month behind. For October, there were reductions in both job openings and hirings. Employers continue to report that they aren’t filling openings, because they can’t find the employees they want.
New unemployment claims declined by 10,000, keeping the four-week average just above 250,000.
The non-manufacturing segment of the economy continues to perk along. The ISM Non-Manufacturing Index increased a sharp 2.4 points to 57.2. Most of the segments of the index were very positive, indicating the economy remains in a self-sustaining growth phase. The PMI Services Index actually declined 0.2 to 54.6. But that level still indicates solid growth.
Productivity finally registered a solid 3.1% increase for the third quarter, which is the best number since the second quarter of 2015. But unit labor costs increased 0.7%. So, the increase in productivity didn’t improve profit margins.
In the week’s only manufacturing report, Factory Orders rose 2.7%. After excluding the volatile transportation sector, the increase was a solid 0.7%, and last month’s number was revised higher. The disappointment in the report is that core capital goods, a measure of business investment, rose only 0.2%.
Consumers continue to increase their borrowing through credit cards, according to the Consumer Credit report. Auto and student loans continue to be the main sources of borrowing. But credit card use increased about 6% this year, indicating high confidence and higher incomes among households.
U.S. stocks rallied again. The S&P 500 returned 1.91% for the week ending with Wednesday’s close. It’s up 5.37% in the last month. The Dow Jones Industrial Average gained 2.13% for the week. The Russell 2000 gained 3.26%. The All-Country World Index returned 2.30%. Emerging market equities gained 1.97%.
Long-term treasuries gained 0.34% for the week. They’re down 7.64% for the last month. Investment-grade bonds returned 0.52% for the week. Treasury Inflation-Protected Securities (TIPS) returned 0.19%. High-yield bonds returned 1.40%.
The dollar declined 1.33% for the week.
Energy-based commodities rose 1.81%. Broad-based commodities gained 2.20%. Gold was flat for the week.
Bob’s News & Updates
This is the last week of the holiday sale for my latest book. Amazon.com sells the second edition of “The New Rules of Retirement” between $18 and $20, plus shipping. I’m offering autographed copies for only $20 per copy, and we pay the shipping. This offer is limited to the first 200 books. The highly-acclaimed second edition continues to receive five-star and four-star ratings on Amazon. The book is ideal for anyone who is either retired or planning for retirement. It’s a great gift for friends and family.
Send a check for $20 per book to Retirement Watch, LLC, P.O. Box 222070, Chantilly, VA 20153. We pay the shipping. Be sure to include your return address.
Or you can order directly from Amazon.
I’ll be making some speaking appearances in 2017. The first will be at the MoneyShow Orlando, February 8-11, 2017, at the Omni Orlando Resort at ChampionsGate. Use my priority code, 042315, and mention it when you call 1-800-970-4355 to register.
Some Reading for You
Here’s a five-minute video of how two economists view Christmas and gift giving.
This article explains how one man used various international financial tools to hide $400 million from his wife during a divorce.
Here are the details of how OPEC negotiated its latest production deal.
I comment and link to these and other items on my public blog at http://www.bobcarlson.net.