Thursday, January 8, 2026

Stale news: one “hurrah!” for the positive report on manufacturers’ durable and capital goods orders - for October

 

 - by New Deal democrat


In the category of updated but stale data, yesterday manufacturers’ durable goods orders were released for October. The headline number declined -2.2% to close to a post-pandemic record, while the core capital goods number increased 5.3%: 



Even though it declined, the three month average of capital goods orders was higher than at any point since the pandemic except for the May-July period of last year.

This is - or perhaps more accurately, was - good news. It certainly indicates that through three months ago the general trend of durable goods activity continued to be positive. But the monthly regional Fed reports of manufacturers new orders were also improving through that period, before fading in the past month or two.

So, one “hurrah!” for the good number, but as old news it has little use at this point going forward.


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November JOLTS report consistent with a weak, but sideways rather than negative, trend in the labor market

 

 - by New Deal democrat


Yesterday’s JOLTS report for November was not stale inasmuch as it was at best delayed by a week or two. But nevertheless, since it was for November it remains somewhat old news that can only help to confirm other data we have already received. 

Last month I concluded that the October report “was emphatically not good. In fact, it was red flag recessionary.” But I also noted it was insufficient without confirmation by another month of two’s worth of data. 

In a nutshell, November’s report did not confirm October’s. For most of 2025, in contrast to much other data in the jobs sector, the JOLTS reports had been very much consistent with a “soft landing” jobs scenario. It was not so in October, but returned to that configuration in November.

To briefly recap, the survey decomposes the employment market into openings, hires, quits, and layoffs. The first of those, openings, is soft data that can be influenced by stale or false postings, and trolling for new resumes. It has been on a general uptrend ever since the inception of the series 25 years ago. In contrast, the other series are hard data representing actual actions - and all of those were bad.

Let’s begin with job openings (blue), hires (red), and quits (gold) all normed to 100 as of just before the pandemic:


The “soft” data of openings has been rangebound between 7.103 million and 8.031 million for the past 18 months. This month it declined -303,000 to near the lower bound of that range at 7.146 million. Meanwhile actual hires declined -253,000 to 5.115 million, the lowest reading since the pandemic except for June of 2024. On the other hand, quits rose 188,000 to 3.161 million, solidly in their 18 month recent range. In general, what we see is a sideways trend in all of these for the past 18 months, with a slight jag towards the lower range in the past 6 months.

On the same vein, layoffs and discharges, which while noisy lead both continued jobless claims (gold) and the unemployment rate (red) declined -163,000 to 1.687 million, right in the middle of their 18 month range:



This suggests that in particular the unemployment rate is unlikely to rise further in this or next month’s report.

Finally, the quits rate (left scale), which typically leads the YoY% change in average hourly wages for nonsupervisory workers (red, right scale), rose 0.1% back to 2.0%, also in the middle of its range for the past 12+ months:


This suggests that nominal wage growth, which has been trending slightly downward during that period, is likely to stabilize at least this month. The question here is very much whether the inflation rate will continue to rise (complicated by the downward kludging of the huge shelter component of inflation that will remain with us for at least several more months).

I called the last JOLTS report for October “a bad, even recessionary, report consistent with actual job losses in October.” This report was also consistent with the slight positive rebound in the jobs report for November. In all, a weak, but sideways rather than negative, trend.
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Jobless claims start the year where they left off: very low firing, problematic hiring possibly easing

 

 - by New Deal democrat


Let’s take our weekly look at jobless claims, which are the best up-to-the-moment measure of the labor market.


Initial claims rose 8,000 to 208,000, while the four week moving average declined -7,250 to 211,750. With the typical one week delay, continuing claims rose 56,000 to 1.914 million:


As a reminder, this is the exact time of the year when hard to adjust for seasonality most comes into play. Additionally, there has been a post-pandemic pattern of claims rising in the first half of the year towards a maximum, and declining in the second half to a minimum. This year fits that pattern, but with a pronounced declined since the beginning of November. Nevertheless, initial claims remain very low historically compared with the last 50 years.

As per usual, it is the YoY comparison which is most important for forecasting purposes. There, initial claims were down -4.3%, and the four week average down -0.9%. Meanwhile continuing claims are higher by 2.3%:


This is very much in line with the “low hire, low fire” economy. In fact, the “low fire” portion has been getting even lower. Continuing claims, while elevated compared with 2022-24, have also declined significantly since early November, although they remain higher than the earlier part of 2025. So the “low hire” facet of the labor market may have eased a bit.

All in all, another positive report indicating an economy that is still expanding.


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Wednesday, January 7, 2026

ISM services report for December powerful evidence that the services providing sector of the US economy remains in solid expansion

 

 - by New Deal democrat


As I indicated yesterday and earlier today, we got some stale data on factory orders this morning, as well as a JOLTS report for November. I’ll take a look at those tomorrow.


In the meantime, the big news of the morning has to be the very good ISM services report for December, which shows that the 75% or so of the economy that is services was nowhere near recession last month. *All* of the components moved in the right direction.

To wit, the headline number increased 1.8 to 54.4, the best number since October 2024 (recall that any number above 50 means expansion):


New orders increased sharply, by 5.0 to 57.9, the best reading since October 2024:


Employment increased 2.1 from contraction into expansion at 52.0, the best reading since last February:


Finally, price paid decreased (which is good) -1.1 to 64.3, still showing lots of price increases, but still the lowest number since last March:


I will update this note later today with the three month economically weighted average including the manufacturing sector, but with these numbers it is plain to see that the result is that the economy continued in expansion in December, powered by the services sector.

Further, the ISM services report is in accord with the positive number from ADP this morning, much as the decline in truck sales accords with the continuing contraction shown in the ISM manufacturing report on Monday.

Which means that in Friday’s employment report, I will be looking for a decline in goods-producing jobs, but an increase in service providing jobs.

UPDATE: As promised, here are the economically weighted three month averages for both the headline and new orders indexes:

Headline: services 53.1, manufacturing 48.3; economically weighted average 51.9
New orders: services 55.9, manufacturing 48.2; economically weighted average 53.8

As I wrote this morning, it really is an easy call with the December services numbers.


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In December, truck sales tanked while car sales and private jobs (per ADP) increased

 

 - by New Deal democrat



I will write about the biggest economic release of the day, the ISM services report for December, later. In the meantime, here are two other important data releases for December, one from a private source (ADP), and the other from the BEA’s GDP updates.

As an initial matter, I don’t think we can be confident of the month to month accuracy of the official jobs report for several more months - and that is not counting any further disruption from another possible government shutdown in February.

To cut to the chase, ADP reported at 41,000 gain in private jobs in December. As shown in the graph linked to below, according to this series since July only 27,000 jobs have been added to the economy in total, or an average of 5,400 each month(!):


While this is not recessionary, it is about as close as you could come to the precipice. We’ll see what the official report says on Friday.

An important if underutilized short leading indicators for recessions is vehicle sales. After houses, these are the biggest durable purchases made by the vast majority of consumers. As I have noted in the past, typically truck sales decline first (and rebound second), followed by car and pickup truck sales (which rebound first). Additionally, truck sales are much less noisy and so, after housing, give the first clear warning that a recession is likely ahead.

And December truck sales, which declined another -9% from November to .311 million annualized units, and are down -43.6% from their post pandemic peak, are clearly recessionary (note: since FRED for some reason implements a one month delay in updating its graphs, I have subtracted the December values for car and truck sales so that that level shows at the 0 line. Additionally, I have multiplied the truck sales number by 10 for scale):


In fact, there has never been a case where such a decline has not been shortly followed by a recession, if the economy was not already in one.

Car and light truck sales, by contrast, increased 0.4 million in December to 16.0 million annualized units. This is down -11.6% from their post pandemic peak in 2021, and -10.6% down from their secondary peak last March when there was a rush to buy before tariffs kicked in.

Further, while the 3 month average trajectory since March has been declining, at their current levels car and light truck sales are at higher levels than at any time from 2022 through late 2024. So while truck sales are very recessionary, car sales are not recessionary at all.

I’ll try to draw some broader implications for the economy once we have the ISM services report in hand as well.


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Tuesday, January 6, 2026

Real wages and consumer spending have been crucial positives; here is the most updated look


 - New Deal democrat



We are still suffering the aftereffects of the government shutdown, with no data today, but a helping of mainly stale government data tomorrow and Friday. Tomorrow we get up to date private data from the ISM for services, and from ADP for private employment, along with manufacturers’ orders for October. On Friday we get the official employment report for December along with the very stale housing permits, starts, and construction data for September and October. And if there is another government shutdown in February, these will likely be the last government updates on those subjects until that is over. My plan is to report on the current data on the dates of release, but delay one day until Thursday and Monday to look at the already stale data.

In the meantime, let me do an update on the overall economy and focus on the components of a crucial employment indicator that will be updated as part of Friday’s jobs report.

Let me start by reporting a link to a graph I put up last Friday , which norms nonfarm payrolls, industrial production, real manufacturing and trade sales, and real income less government transfers to 100 as of July. As I noted then, only two of the four - real income and payrolls - exceeded their July readings only once, in September, by 0.1%. All other readings since July have been either flat or down, with several not updated yet since the shutdown. In general the four series, taken together, have been largely stagnant since March or April:
Thus, as I noted, it is possible that July was an expansion peak, with at least a brief shallow recession lasting through the government shutdown.

On the other hand - again as I noted last Friday, by way of Redbook’s weekly retail spending data, one crucial component of the economy has held up well: consumer spending. The official government reporting on this is also very stale, with the last updates only through September, and no further updates scheduled (as of now) until January 29. 

With that major drawback, here is a link to real personal consumption on goods (red), services (blue), and real retail sales (gold) through September, normed to 100 as of last December:


As shown in this graph, both real retail sales and real spending on goods have barely budged since then, with the highest reading only 0.4% higher, in August; while real spending on services has continued to climb on trend. As I have noted in the past, real spending on services tends to continue to increase even through most recessions. And the three month average of the other two measures has continued to increase throughout 2025 at least as of the last reading for September. It appears that, at best, we won’t know if this average turned down in October or November until the end of this month.

Another metric that has continued to rise in 2025 has been real average hourly wages. 

As you probably recall, one of my headline leading indicators is real aggregate nonsupervisory payrolls. This shows the aggregate amount of $$$ in real terms that average American households have to spend, and have reliably peaked (though no indicator is perfect!) a few months before the onset of recessions. Indeed it is likely that consumers pulling back in reaction to shrinking real payrolls is a main driver of most recessions.

In that regard, the below link goes to a graph which shows the two components of that measure: aggregate hours worked (blue) and real average nonsupervisory hourly wages (red). Becuase there was no update for inflation for October, I also show nominal hourly wages (gold) through November. These are all normed to 100 as of March: 


Since then, aggregate hours worked by nonsupervisory workers have been all but stagnant, higher by only 0.2% as of November. Through September, real hourly wages had risen at best 0.4% in July. Together these meant that real aggregate payrolls were all but stagnant. 

Then, due to the CPI report for November (which featured a seriously anomalous low reading for the large shelter component of inflation), real hourly wages jumped by another 0.4% to 0.6% higher than in March. This contributed to a 0.8% increase over March of real aggregate payrolls as well. 

Let me draw this together. The number of jobs and hours worked in 2025 through November was almost completely flat. But wages, both nominal and real, continued to improve - at least through September - helping to drive consumer spending and in particular, on a three month averaged basis, on goods. It is this spending which *may* have kept us out of recession, depending on how the data is reported for the months of the government shutdown. 

Which also means that on Friday I will be paying particular attention to the nominal increase in nonsupervisory wages, both monthly and YoY. This will be important in estimating whether real aggregate payrolls have continued to increase, or whether November’s spike was an outlier and possibly a peak.

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Monday, January 5, 2026

December ISM manufacturing report: continued contraction, continued stagflation, poor employment

 

 - by New Deal democrat


We are still suffering the data aftereffects of the government shutdown. Normally we begin each month with reports on both construction spending as well as manufacturing. But the construction report even now has only been updated through August, and won’t be updated for September and October until January 21. And by the way, the current spending bill expires on February 1, so another shutdown may be around the corner.

Which means, as I have said repeatedly for the last month or more, that the regional Fed manufacturing and services reports, as well as the ISM manufacturing and services reports, are our best contemporary picture of the economy.

And this morning’s ISM manufacturing report for December confirms what the regional Fed reports were telling us: the forward-looking situation is improving, in the sense of being “less bad,” while prices paid increased remain widespread, even if not so much as earlier in 2025, and employment in the goods producing sector continues to contract.

In more detail, the headline number declined -0.3 to 47.9 (recall that any number below 50 means contraction), the lowest reading since October of 2024; but higher than most readings in 2023 and 2024:


The more forward looking new orders component increased 0.3 to 47.7, generally continuing the “less bad” trend of the latter part of 2025 and more broadly, since 2023:


On the other hand prices paid were steady at 58.5, lower than the readings approaching 70 last spring, but aside from that higher than all but one reading in 2023 and 2024:


And employment remained dismal at 44.9, up 0.9 for the month, but on a three month rolling basis continuing the declining trend since the middle of 2024.


This suggests a further decline in goods-producing jobs when we get the December employment report at the end of this week.

For forecasting purposes, I use an economically weighted three month average of the manufacturing and non-manufacturing indexes, with a 25% and 75% weighting, respectively.

With today’s report, the three month average for the headline number is 48.3. The more significant news is that the three month average of the more leading new orders subindex declined slightly further to 48.2. At the same time, both remain slightly better than their low points in 2022-23, which is noteworthy because there was no recession then.

As I have noted in all of these monthly reports for the past year, for the economy as a whole the weighted index of manufacturing (25%) and non-manufacturing (75%) indexes is more important. In the non-manufacturing report, the averages of the last two months for the headline and new orders numbers have been 54.4 and 54.5, respectively. Needless to say, if the services sector remains as strong in December as it has been in October and November, then the weighted average is going to remain signficantly in expansion territory.


To sum up, the ISM manufacturing report for December, to which I would give more wight, confirmed the average of the regional Fed manufacturing reports for the month. Those indicated a stabilizing to slightly contracting manufacturing sector, with contracting employment,  and also facing continuing stagflationary price pressures. 

There has been a very significant divergence in 2025 between the regional Fed services reports, which have indicated pronounced weakness, vs. the ISM services reports, which for all months but one this past summer have indicated good growth. On Wednesday we will see if this continues, or whether services are also beginning to weaken.
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Saturday, January 3, 2026

Weekly Indicators for December 29 - January 2 at Seeking Alpha

 

 - by New Deal democrat


My “Weekly Indicators” post is up at Seeking Alpha.


As 2025 ended, all of the important trends seemed to intensify. The US$ is down 10% YoY by one measure, commodities are higher by the same or more, oil prices continued to fade, and the recent waning in the YoY growth of withholding tax payments - by at least one measure - intensified.


As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me with a penny or two for my efforts collecting and collating it for you.

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