Money Talk Podcast, Friday Dec. 7, 2018
Landaas & Company newsletter December edition now available.
Advisors on This Week’s Show
(with Max Hoelzl and Joel Dresang)
Week in Review (Dec. 3-7, 2018)
SIGNIFICANT ECONOMIC INDICATORS & REPORTS
The manufacturing index of the Institute for Supply Management rose in November after two months of slowing. The index, based on surveys with purchasing managers, indicated the 27th month in a row of expansion for manufacturing. Most components of the index showed faster growth, including particularly strong readings for new orders, reflecting robust demand. According to the ISM, the index suggested the U.S. economy was growing at an annual pace of 4.9%.
The annual rate of construction spending inched down 0.1% in October, a 4.9% advance from October 2017. Housing spending, including home improvements, declined 0.5% for the month but rose 1.7% from the year before, according to the Commerce Department. Public construction spending rose 0.8% from September and 8.5% year-to-year. Expenditures on commercial construction declined 0.4% from September, but was up 3.9% from the year before.
The pace of motor vehicle sales decelerated 0.5% in November. Dealers sold an annual rate of 17.4 million vehicles, according to the Bureau of Economic Analysis. Car sales declined both on a monthly and year-to-year basis. Truck sales increased, particularly over the year. Analysts watch automotive sales for signs of trends in consumer spending, which accounts for more than tw0-thirds of U.S. economic growth.
Markets closed in mourning for former President George H.W. Bush
The U.S. trade deficit widened 1.7% to $55.5 billion in October, the biggest gap since October 2008. The Bureau of Economic Analysis said exports, disadvantaged by a strong U.S. dollar, declined 0.1%, led by aircraft, foods and beverages. Imports, aided by healthy U.S. consumer spending on such items as automobiles rose 0.2%. Net exports contribute to growth in the gross domestic product, so a widening trade gap detracts from economic growth.
The four-week moving average of initial unemployment claims rose for the fourth week in a row and the 10th time in 11 weeks after reaching the lowest point since 1969. Even though the jobless applications average rose to its highest level since April, it remained 36% below the 51-year average, according to Labor Department data. The indicator suggests a tight employment market in which employers do not want to let workers go.
The Bureau of Labor Statistics reported that worker productivity rose at an annual rate of 2.3% in the third quarter, up slightly from an initial estimate. Worker output increased at a 4.1% pace in the quarter, while hours worked rose 1.8%. Year-to-year, productivity gained 1.3%, part of a pattern of more than two years of sluggish growth. Unit labor costs declined 0.9% for the third quarter. Slow productivity has been an ongoing concern since the recovery from the Great Recession. Productivity is key to maintaining the standard of living and raising wages, which fuels economic growth.
The Commerce Department reported that factory orders declined in October for the first time in three months, led by a drop in aircraft orders. Excluding volatile orders for transportation equipment, orders rose 0.3% for the month and was up 7.7% year-to-year. A proxy for business investments, which has been lagging economic expansion, rose was unchanged for the month after two months of declines and up 6.4% from October 2017.
The non-manufacturing sector of the U.S. economy continued to expand in November for the 106th consecutive month. The ISM non-manufacturing index accelerated to a reading of 60.7, exceeding the 12-month average, which includes a 13-year high in January. Components measuring production and new orders grew faster; hiring slowed. Purchase managers surveyed said they’re optimistic about business conditions and the direction of the economy but concerned about employment resources and the impact of tariffs.
U.S. employers added 155,000 jobs in November, below the 12-month average of 196,000, according to the Bureau of Labor Statistics. Still, the economy extended its record length of job gains to 98 months in a row. Average hourly wages rose 3.1% from November 2017, the same as October and the highest since 2009. Economists have been waiting for wage growth to pick up, considering the unemployment rate stayed at 3.7% for the third month in a row, the lowest since 1969.
Consumers expressed greater enthusiasm for current economic conditions, suggesting glad tidings for holiday shopping, according to a longstanding University of Michigan survey. Overall, consumer sentiment was unchanged from where it ended November. The heightened view of current conditions was offset by slightly lower expectations for job prospects down the road.
Where the Markets Closed for the Week
- Nasdaq – 6,969, down 361 points or 4.9%
- Standard & Poor’s 500 – 2,633, down 127 points or 4.6%
- 10-year U.S. Treasury Note – 2.85%, down 0.16 point
- Dow Jones Industrial– 24,388, down 1,150 points or 4.5%