- Jobless claims will be wild over the next few weeks; the underlying trend won’t emerge until mid-January.
- Leading indicators of claims are mixed, but claims are more likely to rise than fall over the next few months.
- The ADP is a deeply unreliable guide to the official payroll numbers; we recommend you ignore it.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The December ISM manufacturing index likely fell, leaving it broadly in line with the cycle low…
- …But falling interest rates likely will lift capital spending and manufacturing activity in 2024.
- The Fed minutes are unlikely to reveal anything new, but we continue to expect rate cuts as early as March.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
WHEN DO THEY START, AND HOW FAST DO THEY GO?
- ...INFLATION IS BEATEN; RATES ARE A ONE-WAY RIDE
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We think the core PCE deflator rose by only 0.11% in November; the trend is slowing sharply.
- Consumers’ spending is still rising, but the rate of growth is moderating after the Q3 jump.
- Aircraft and autos likely lifted November orders, but expect a soft core.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The latest WARN data suggest layoffs remain low, but seasonals will lift initial claims in the next few weeks…
- …And rising continuing claims suggest people who lose their jobs are taking longer to find new positions.
- The jump in December confidence tells us that people like cheaper gas and rising stocks; who knew?
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- FOMC speeches move markets, but they are not a reliable guide to what will happen in three months.
- The surge in November single-family starts is noise, not signal; expect a correction in December.
- People’s uneasiness over the labor market signals a gradually upward trend in unemployment.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Homebase signals December payroll growth of about 225K; no sign of further weakening yet.
- Lower rates are beginning to cheer homebuilders, who will gain further market share as home sales rise.
- Single-family construction is rebounding, fitfully, but the multi-family rollover has further to go.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Retail sales data suggest Q4 consumption is on course for a 2½% gain, but that could change.
- Households’ real liquid assets are back to their pre-Covid trend; the pandemic excess is gone.
- Manufacturing production likely rebounded strongly last month after the UAW strike, but the trend is flat.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Chair Powell says the Fed is done—probably—but still doesn’t want to talk about when they’ll ease.
- The inflation forecasts still look very cautious, and likely will be undershot.
- Headline November retail sales constrained by cheaper gas, but the core likely was soft too.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The FOMC likely will cut its inflation and interest forecasts, but will push back against easing talk.
- Core disinflation pressure remains intense, but core services inflation is still too high.
- PPI margin inflation is now close to zero, but it could easily fall well below zero next year.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We look for a 0.2% November core CPI print, but a 0.3% increase is more likely than 0.1%.
- The bigger picture, though, is that core disinflation is well underway, and has much further to run.
- The NFIB index likely rebounded in November, but the details of the survey are what matter.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Homebase and the ISM services employment index signal upside payroll risk for November.
- But the underlying state of the labor market is weakening, and wage growth is slowing.
- Look at the Michigan expectations index, not the headline; it’s a better predictor of actual spending.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The gap between the GDI and GDP numbers is unusually large by historic standards...
- ...Undercounting of interest payments means that big upward revisions to GDI are a good bet.
- ISM services signals modest and steady growth, but hints at a hefty bounce in October payrolls.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Higher rates and tighter lending standards are depressing credit and constraining spending…
- …But the hit is modest, so far, and the deterioration in credit quality is not yet alarming.
- Initial jobless claims are wild around Thanksgiving, but look for a further increase in continuing claims.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The quits rate fell much further than implied by the drop in unemployment during the Great Rehiring…
- …It correctly signalled that wage gains would rocket, but now it tells the opposite story.
- ISM services has tracked sideways in recent months, net; the pattern likely continued in November.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Core PCE inflation is fading rapidly; in recent months it has run only just above 2% on a sequential basis.
- Consumption spending slowed at the start of Q4, but likely is on course to rise at a 2%-plus rate.
- Look for only a modest bounce in the ISM manufacturing index, despite the leap in the Chicago PMI.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The October PCE data likely will confirm that core disinflation continues, but still has a way to go.
- Spending growth appears to have moderated, though one softer month proves nothing.
- Jobless claims likely rebounded last week, though the Thanksgiving seasonals are tricky.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Treat everything you read about holiday spending with great skepticism; reliable data don’t exist.
- Even the official retail sales numbers can’t be trusted until after at least one round of revisions.
- The trade deficit was wild during and immediately after Covid, but it’s much calmer now.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Gas and stock prices have an outsized influence on consumers’ confidence indexes, politics matters too.
- The expectations subindexes historically have been a decent guide to real consumption spending.
- Monthly swings in new home sales are mostly noise, but the trend is now flattening.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The upturn in jobless claims bears close attention, though it’s much too soon to panic.
- Ignore the wild durable goods headline; core capex orders are rising, but other data are less benign.
- Consumers’ sentiment likely will respond to cheaper gasoline; will inflation expectations do the same?
Ian Shepherdson (Chief Economist, Chairman and Founder)US
