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Jobs week, as some economic geeks call the first week of each month, kicked off with a jolting report. Depending on if you are someone looking for a job or someone working at the Federal Reserve, the data was bad or good. The monthly Job Openings and Labor Turnover Survey, known as the JOLTS report, revealed the lowest number of job openings since early 2021 and the largest one-month decline in five months. Granted, the number of jobs available at the end of October is still historically strong at 8.73 million, far above the 20-year pre-pandemic average of 4.5 million. The decline in job openings was broad-based across sectors, suggesting all businesses are pulling back from hiring and are focusing on keeping current staff. The JOLTS data showed layoffs remained historically low and the quits rate, a measure of people voluntarily leaving their job, held steady at the lowest level since early 2021 for the fourth month in a row. This is what the Fed wants to see – a softer labor market that includes keeping workers.
The Labor Department’s monthly job report corroborated the positive trend. Employers added 199,000 jobs in November, more than expected. Most of the jobs added were in health care, followed by government and leisure & hospitality. Some of the additions came from returning auto and Hollywood workers. The retail sector lost the most jobs, followed by trade & transport. Unemployment fell from 3.9% to 3.7% as more than 700,000 people re-entered the labor market looking for jobs. The labor force participation rate, which measures the percent of people currently in the labor force, inched up to 62.8, the highest level since the pandemic began. Average hourly earnings, while increasing 0.4% for the month, rose 4.0% year-over-year. This is the smallest increase since 2020, excluding a one-month aberration in April 2021. This week’s job-related data should be enough for the Fed to remain on hold, with a slight lean towards easing.
Key Indicators this Week
Institute for Supply Management –The ISM manufacturing index remained below 50 for the 13th month, firmly in contraction territory. All sub-sectors, except production, remained below 50 as well. Production was just barely in expansion territory at 50.4. Prices rose, employment fell and inventories were up. The sister index for services was the opposite. All categories remained above 50, noting expansion. Prices paid fell for the third month to the lowest level since July. Employment increased slightly after falling for three months. New orders were flat. While neither report had extreme changes, the indices in total suggest the economy is cooling across the board.
Household Wealth – U.S. household wealth declined 0.9%, or $1.3 trillion, in the third quarter due to a drop in equity valuations. The three key stock indices were negative in the third quarter for the first time in a year. Counteracting the loss was an increase in the value of household real estate, which rose to a new high.
Strategically for Credit Unions
Interest rates plummeted again this week. The weak job data seemed to clinch the market’s suspicions or hopes that the Fed will begin cutting interest rates early in 2024. Odds grew to 60% for the first cut to happen in March with an additional 25 basis points cut thereafter at each FOMC meeting. The futures market priced in the fed funds rate to be below 4% by January 2025. That being said, this is the time to begin locking in high 4% or 5% rates for the longer term.
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 purposed 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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