See this week's numbersFriday, December 2, 2016

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Unemployment is the lowest in nine years

You saw it here first. This is a how your local media will report the latest news from the Labor Department: the unemployment rate fell to 4.6 percent in November, the lowest rate since August 2007. The household measure comes from twice as many people leaving the workforce than entering. The more inclusive data from the Labor Department reveals that employers added 178,000 jobs during November, very close to expectations. The underemployment rate, the U6, fell by 0.2 percent to 9.3 percent. Hourly earnings declined 0.1 percent, the first decline since December 2014. While accuracy of the unemployment rate will be debated, the complete job report reflects a strengthening labor force.

Other Key Indicators this Week:

GDP – It's commonly said that hindsight is 20-20. That may be the case in analyzing the U.S. economy. The first revision for third quarter growth shows the economy expanded by 3.2 percent, versus the original estimate of 2.9 percent. This was the strongest growth pace in two years. The faster growth came from a revised increase in consumer spending to 2.8 percent from 2.1 percent. While a better than the first showing, the higher pace still pales against second quarter’s healthy 4.3 percent growth. Business spending continues to be the weak link in economic growth, falling 4.8 percent, versus the original decline of 2.7 percent. Exports were revised higher to the quickest pace in almost three years, but most of the increase is still being attributed to a surge in soybean exports.

Consumer Confidence – Two measures of consumer confidence exploded this month. The University of Michigan study surged to 93.8 from 87.2 a month ago. Optimism in the study was widespread and suggested expectations of growth ahead. The New York-based Conference Board index increased to 107.1, its highest level in over nine years, from 100.8. Almost a third of respondents said the economy was in good shape, and expectations for the next six months climbed to the strongest level since June 2015. A larger share of respondents said jobs are plentiful. Most of the responses were collected before the election, but a sampling afterward showed no difference in sentiment.

Spending/Income –
Incomes increased more than consumer spending in October. Incomes jumped 0.6 percent in October, the largest monthly increase since April and the second monthly increase. Spending faltered in October, rising 0.3 percent, following an upward revision of 0.7 percent in September. Some of the decline in spending came from a 0.3 percent decline in services, which included utility use. October was the warmest October in 53 years. The savings rate increased 0.3 percent to 6.0 percent.

Between the Numbers:

The rally in bond yields continued with a vengeance this week. Both the two-year and 10-year Treasury notes reached the highest yields in years. Keep in mind, the increase in yields (and the stock market explosion) occurred on the presumption of lower taxes, increased infrastructure spending, higher inflation and better corporate earnings. Yields were close to these levels this time last year, before falling between 60 and 100 basis points. The road higher may not be a straight shot, but rather, another roller coaster ride with surprising twists and turns.

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.

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