The economic data released this week is consistent with a moderate economic expansion in Q4. Most of the economic chatter surrounded trade, OPEC and the U.S. jobs report.
U.S. payrolls expanded by 155,000 net new jobs in November. The unemployment rate stayed at 3.7 percent. Wage pressure remained moderate. Average hourly earnings were up 0.2 percent for the month and 3.1 percent over the previous 12 months. The labor force participation rate was unchanged at 62.9 percent.
The U.S. international trade gap widened in October to -$55.5 billion. Imports rose by $0.6 billion while exports declined by $0.3 billion. The big news in international trade came during the G-20 summit last weekend. The leaders of the U.S., Mexico and Canada signed the new North America trade accord known as USMCA. Each country’s legislative body must still ratify the agreement into law. Also, it was announced that the U.S. and China have committed to a 90 day truce on imposing new tariffs to allow for more time to conduct negotiations.
The ISM Manufacturing Index unexpectedly climbed in November up to 59.3 after dipping in October to 57.7. A reading near 60 is a very positive indicator for manufacturing. The ISM Non-Manufacturing Index also improved for the month, up to 60.7.
Total construction spending was little changed in October, down by just 0.1 percent for the month. Private residential construction spending dipped by 0.5 percent as new single-family construction faded. The U.S. housing market has cooled in 2018. The months’ supply of new single-family housing available for sale has grown every month since May. This will limit residential construction activity in the near-term. Private non-residential construction was down 0.3 percent for the month.
Mortgage applications improved in the last two weeks of November after declining for the first half of the month. The composite index was up 2 percent for the week ending November 30 as refi apps grew by 6.2 percent. Purchase apps were up by 0.8 percent.
Initial claims for unemployment insurance eased by 4,000 for the week ending December 1, to hit 231,000. Initial claims have trended a little higher since September yet remain at a very low level indicating ongoing strength in the U.S. labor market. Continuing claims fell by 74,000 to hit 1,631,000 for the week ending November 24.
Auto sales went unchanged at a 17.5 million unit rate in November, stronger than we expected. Solid job growth, wage gains and consistent high consumer confidence are all supporting auto sales. Increasing finance costs and a cooling housing market are negatives for the industry.
OPEC agreed to a 1.2 million barrel per day production cut today. The announcement should bolster oil prices. WTI crude prices dipped from the mid-$70 range in October down to the low $50s in early December. It remains to be seen how compliant member countries will be with the agreement, including Iran which says that it is exempt from cuts.
The Federal Reserve remains on track to implement its fourth 25 basis point rate hike for 2018 at the conclusion of the FOMC meeting over December 18/19. We will receive a plethora of information from the Fed on the 19th, including a dot plot, economic forecasts and a post-meeting conference by FOMC Chairman Jay Powell.
For a PDF version of this report, click here: Comerica Economic Weekly, December 7, 2018
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