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Jobs Increase, Wages Disappoint

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It was another stellar month for job growth. The U.S. added 228,000 jobs in November, many more than estimated. Business services, manufacturing and construction were among the industries with the largest job gains. More full-time than part-time positions were placed, reflecting a welcome shift toward a greater quality labor force. The weak link in an otherwise solid job report was wages. Average hourly earnings only increased 0.2 percent, up 2.5 percent for the year. Both measures were below estimates. With unemployment at 4.1 percent, economists continue to scratch their heads over the stagnant growth in wages.

Other Key Indicators this Week:

Productivity – Worker productivity increased three percent in the third quarter, the largest increase since 2014 and double the pace of the second quarter. Productivity levels have steadily risen this year after falling 0.1 percent in 2016. The increase in worker output is a welcome turnaround from years of anemic performance, but many economists are skeptical the current high level can be sustained.  Weak productivity levels are keeping wages low. Unit labor costs increased 0.5 percent in the third quarter, but decreased 0.1 percent from a year ago.

Service Industry – The non-manufacturing ISM index declined to 57.4 in November after reaching a 12-year high mark in October. The drop was expected after the unusual surge of activity in October that was led by construction and supplier deliveries, as the Southeast worked to rebuild after the hurricanes. Even with the decline, the service industry remains in good shape, with 16 industries reporting growth in November. The service industry accounts for about 90 percent of the economy and remains healthy.

Trade Deficit – The U.S. trade deficit widened to $48.7 billion in October, an increase of 8.6 percent. This was the widest level in nine months. Imports increased 1.6 percent, as merchants purchased more foreign-made mobile phones, clothes and toys ahead of the holiday shopping season. Exports were unchanged. The gap in petroleum narrowed by $4.5 billion due to a gain in exports.

Strategically for Credit Unions:

Warning – the yield curve is at its flattest level in a decade. The difference between the 10- and two-year Treasury is in the mid-50's. The Federal Reserve meets next week for a two-day Federal Open Market Committee meeting. It is fully expected they will raise the benchmark rate by 25 basis points. Unless Washington can come up with a viable tax reform plan, be prepared for even more tightening between short- and long-term rates.

Sarina Freedland –Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.