Week of January 2 - 4, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

January 8, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (Dec 29) 220k est., 231k actual, 221k prior
Continuing Claims (Dec 22) 1690 est., 1740 actual, 1708 prior
ADP Employment Change (Dec) 180k est., 271k actual, 157k prior: R-
ISM Manufacturing (Dec) 57.5 est., 54.1 actual, 59.3 prior
ISM Employment (Dec) 56.2 actual, 58.4 prior
ISM Prices Paid (Dec) 57.7 est., 54.9 actual, 60.7prior
ISM New Orders (Dec) 51.1 actual, 62.1 prior
Wards Total Vehicle Sales (Dec) 17.24m est., 17.50m actual, 17.40m prior
Change in Nonfarm Payrolls (Dec) 184k est., 312k actual, 176k prior: R+
Two Month Payroll Net Revision (Dec) 58K actual
Unemployment Rate (Dec) 3.7% est., 3.9% actual, 3.7% prior
Average Hourly Earnings YoY (Dec) 3.0% est., 3.2% actual, 3.1% prior
Labor Force Participation Rate (Dec) 63.1% actual, 62.9% prior
ISM Non-Manufacturing Index (Dec) 58.5 est., 57.6 actual, 60.7 prior

 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Capital Market Implications

The new year got off to a busy start last week, as the blockbuster jobs report for December caught everyone by surprise.  December’s employment reports (ADP and Labor Department), both of which were much stronger than anticipated, reaffirmed that (at least through December) the U.S. economy remained on solid footing.  The 312,000 jobs that were created in December brought the full year average to more than 200,000 per month, which made 2018 the best year for job growth since 2015.  Additionally, having increased 3.2%, wages in 2018 were healthier than at any time over the last decade.  Finally, although the unemployment rate edged up to 3.9% last month, it was because discouraged workers reentered the workforce, a sign the labor market maintained its momentum into yearend.

As markets got relief from two concerns last week (namely: the December jobs report indicated the economy was better than some had feared, and Fed Chair Powell reiterated the Fed was not on auto pilot and that monetary policy would be strictly data dependent in 2019), investors were encouraged and markets rallied for the first few days of the new year.  So for the year thus far, the Dow Jones Industrial Average climbed 0.5% and the S&P 500 Index gained 1.0%.  Also last week, equity sectors reversed their 2018 trends, as the energy and retail sectors rose while technology and health care fell.  The year began on a positive note for international markets as developed foreign markets popped 1.0% (however, emerging markets remained unchanged).  Generally, the year begins slowly in the bond trading and that was the case this year. Only high yield bonds demonstrated any movement, as they rose 1.2% in sync with the rally in stocks.  The remaining sectors of the bond market, corporate bonds, municipals and governments all were flat to slightly positive last week.