Last week we had the last big data releases before the Federal Reserve Board’s Open Market Committee meets next week. This data included the first revision of the 3rd Quarter economic growth and personal income and spending. These reports came in on the strong side, with the economic growth revised higher and personal income and spending solid as well. Personal spending for October is especially important, because November is the start of the holiday shopping season. The money made in October certainly affects Black Friday sales.
The most important data was released on Friday, which was November’s jobs report. Nothing affects the economy more than the growth of jobs. Thus far this year, we have had strong, but not explosive jobs growth. Friday’s numbers came in at 178,000 jobs added, and a drop in the unemployment rate to 4.6% from 4.9%. While the headline number was much stronger than expected, the number of jobs created came in near expectations and the previous month was revised down by 20,000 jobs. This means that the lower unemployment rate was at least partially due to a shrinking labor force.
Just as important, wage growth came in at below expectations on a month-to-month basis, but slightly higher than expectations on a yearly basis, which was a mixed bag. Why is wage growth so important? The Fed is looking for any evidence of inflation to buttress their decision on rates. Right now, it is expected that the Fed will raise rates next week, but we don’t know by how much and what might be coming afterwards. This jobs report, taken together with the additional data released this week, certainly gives the Fed enough ammunition to support an increase. However, it is not clear that they have a mandate for anything above the expected 0.25%.
December 6, 2016
Source: Origination Pro