Combined October and November jobs report: a hairs-breadth from recessionary, at best

 

 - by New Deal democrat

At Last this morning we got some up to date labor data from the federal government, but only partially. The Establishment Survey was updated for both October and November, while the Household Survey was not conducted at all for October, and so jumps from September to November.

In November virtually all of the other reports, including from the regional Feds and ISM, as well as others, indicated an actual decline in employment. While that didn’t occur, as we will see below, the general tenor was negative, albeit nuanced.

Below is my in depth synopsis. Note that for the Establishment numbers, I give both October and November reads, as well as the two month net change.

HEADLINES:

• -105,000 jobs lost in October; 64,000 added in November for a net change of -41,000.
•  Private sector jobs increased 52,000 in October and 69,000 in November, for a net gain of 121,000. Government jobs declined -157,000 in October (these are mainly the delayed DOGE layoffs), and another -5,000 in November for a total loss of -162,000.
• September was revised downward by -11,000 to +108,000. 
• The alternate, and more volatile measure in the household report, rose by 96,000 jobs since September.
• The U3 unemployment rate rose 0.2% to 4.6%, since September, the highest since September 2021.
• The U6 underemployment rate rose 0.7% to 8.7% since September.
• Further out on the spectrum, those who are not in the labor force but want a job now rose 203,000 since September to 6.136 million, aside from August the highest level since September 2021.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. For the second month in a row they were mainly negative:

• The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, rose 0.1 hour in both October and November to 41.2 hours, but remains down -0.4 hours from its 2021 peak of 41.6 hours.

• Manufacturing jobs decreased by -9,000 in October and -5,000 in November, the sixth and seventh declines in a row. This series declined sharply in the second half of 2024 before stabilizing earlier this year. It is now at a 3.5 year low.
• Truck driving, which had briefly rebounded earlier this year, declined -1,300 in October and another -4,400 in November, for a total decline of -5,700.
• Construction jobs declined -1,000 in October, but rose 28,000 in November.
• Residential construction jobs, which are even more leading, rose 900 in October and another 3,400 in November for a total of 4,300, making three increases in a row.
• Goods producing jobs as a whole declined -9,000 in October, but rose 19,000 in November, for a net gain of 10,000, after declining earlier this year for 4 months in a row. 

• Temporary jobs, which have declined by over -650,000 since late 2022, declined again in both October, by -12,700, and November, by -5,000, for a total decline of -17,000, a new post-pandemic low.
• The number of people unemployed for 5 weeks or fewer rose 316,000 from September to November,  to 2,543,000, the highest number since the end of 2020.

Wages of non-managerial workers 

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased 0.4% in October and another 0.5% in November, for a net gain of 0.9%, with a YoY gain of +3.9%. This continues to be significantly above the 3.0% YoY inflation rate through September.

Aggregate hours and wages: 

• The index of aggregate hours worked for non-managerial workers was unchanged in October, but increased 0.1% in November, and is up 1.3% YoY, its highest rate since January.

• The index of aggregate payrolls for non-managerial workers rose 0.4% in October and another 0.5% in November, and is up 5.2% YoY, its highest rate since April.

Other significant data:

• Professional and business employment declined -7,000 in October, but rose 12,000 in November, for a net change of 5,000. These tend to be well-paying jobs. This is the fifth decline in a row, and is the lowest number in over 3 years. It is also lower YoY by -0.2%, which in the past 80+ years - until now - has almost *always* meant recession. This is vs. last spring when it was down -0.9% YoY.
• The employment population ratio declined -0.1% to 59.6% from September through November, vs. 61.1% in February 2020.
• The Labor Force Participation Rate rose +0.1% to 62.5% from September through November, vs. 63.4% in February 2020.

SUMMARY

Looking at this from the perspective of the meet two month changes, it was a poor report with only a few bright spots.

Let me note the bright spots first: construction employment, and wage growth. Despite the pounding that the housing market has taken, residential construction employment made a new post-pandemic high in November. And the residential sector was relatively the weakest one within construction. Non-residential construction employment rose sharply - I suspect due to AI-data center building.

Additionally, wages grew sharply in both October and November, which also powered a sharp rise in aggregate payrolls, a very good sign. Additionally, manufacturing showed signs of life as the average workweek in that sector rose.

But these were outweighed by all the negatives. On net, jobs contracted by -41,000 since the last report. Unemployment rose 0.2%, and underemployment rose by 0.7%, both to multi-year highs. Both short term new unemployment and those who want a job are not even looking rose to close to post-pandemic highs. Employment declined in manufacturing, trucking, and temporary help - all leading sectors. And while labor force participation rose, the employment to population ratio declined.

Right now the only sectors holding employment afloat are health care, which on net accounted for all of the gains in the past few months, as well as construction (likely mainly related to AI data center spending). In the seven months since April, only 119,000 jobs have been added, an average gain of only 17,000 jobs per month. And that’s before the likely downward revisions which will be made once the QCEW is integrated into the results.

In summary, the jobs market is either a hairs-breadth above contraction, or actually in contraction.

What do vehicle miles traveled and gas usage tell us about the economy?

 

 - by New Deal democrat

Today is the last day of our data drought before the onslaught of delayed reports that begins tomorrow with the November jobs report and CPI. 

In the meantime, there is a commenter on another economics site who generally believes that everything is OK as along as vehicle miles traveled YoY stay positive - and as of October, the rolling 12 month average was higher by 1.0%. Others robustly disagreed. So I thought I would take a look.

In the first place, here is the 12 month rolling average of total vehicle miles traveled for the past 50+ years in absolute terms:

[I am having a problem with Google giving me access to my photos, so instead here is a link to a FRED graph of the YoY% change in the 12 mile moving average of vehicle miles driven:

 https://fred.stlouisfed.org/graph/?g=1ONkm ]

It’s pretty obvious that total mileage traveled turned down, or at least decelerated markedly, at the onset of or shortly before all of the recessions in the past 50 years except for the pandemic.

But of course that just tells us that it is a *coincident* indicator, best for confirming in the rear view mirror what other data has already been suggesting. Notably, only in 1979 and 2000 did it turn down or decelerate in advance; in 1981, it did not turn down until months after the recession had already started.  Further, there was a significant deceleration beginning in the summer of 2005 that did not correlate to any recession in the next year; and for 4 entire years after the Great Recession miles traveled were completely flat, punctuated with several periods of small declines that did not coincide with recession, and so would have been very wrong signals had they been followed at the time.

Instead, I think that over the long term total vehicle miles traveled have told us that almost all US recessions in the past 50 years have at least in part been due to oil price shocks. And indeed the deceleration in miles traveled in 2005 coincided with gas prices hitting $3/gallon for the first time in the wake of Hurricane Katrina, and the four year period after the Great Recession was characterized by what I called at the time the “oil choke collar”; i.e., every time the economy would pick up, gas prices would shoot to $4, cooling the economy down, which would result in gas prices sinking back to $3, and the cycle would repeat.

In support of this, here is the YoY% change in vehicle miles traveled compared with the YoY change in the price of gas (red, /10 for scale) and for the period predating that statistic, the price of oil (orange, /20 for scale):

[To be supplied]

The oil price shocks stand out, as the YoY change in prices coincides with a sharp downturn in miles traveled. When the shock ends, vehicle miles recover. By contrast, in the 2001 recession and the pandemic there were no spike in gas prices, and the downturn or deceleration in usage was caused by other things.

Similarly, when we look at vehicle miles traveled compared with real GDP (red), we see a strong although not perfect (nothing ever is!) correlation:

[To be supplied]

 

In general, this suggests that we should expect at least a deceleration if not a downturn in vehicle miles traveled roughly coincident with the onset of recession. So here is the close-up of the past four years:

[To be supplied]

Through October, YoY vehicle miles traveled were generally steady, suggesting no recession had begun as of that time - but giving us no information with which to forecast.

But there is a very similar metric, which is gasoline product used, which is updated every week, and thus is current through the first week of December, and here is the story it tells:

[Liink to E.I.A. Data and grap of 4 week average of gasoline usage]

The four week average was significantly negative YoY through most of the summer before recovering in September into October. But for the past five weeks since the beginning of November, it has been very negative.

So, if the signs were positive into October, the decline in usage since then does not bode well for the November data were are about to be deluged with starting tomorrow.

Weekly Indicators for December 8 - 12 at Seeking Alpha

 

 - by New Deal democrat

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

While there were no significant changes in the ratings, two big stories stand out: (1) the nearly total re-normalization of the yield curve in response to Fed interest rate cuts; and (2) evidence of further deterioration in the labor market.

The problem with Fed rate cuts, of course, is if they are in response to an economy that is about to roll over into recession. Yes, they lay the groundwork for a recovery, but you have to go through the recession first!

As usual, clicking through 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 in collecting and organizing the data for you.

Three important fundamentals-based indicators of the consumer economy: are they turning?

 

 - by New Deal democrat

Today is one day of quiet before a slew of updated statistics, including the November jobs and inflation reports, are to be reported next week (it is unclear whether others originally scheduled for next week, like building permits and starts, will also be updated). There was some housing and rental inventory and pricing data for Q3 released yesterday, but I will integrate reporting on that when the next housing data comes out.

Which means that today is a good day to highlight three fundamental datapoints that have in the past been very (although not perfectly!) reliable, all of which either may have just turned or may be on the verge of turning, down.

One fundamentals-based indicator which has a very long history (as in over 70 years) that has been a very good long leading indicator is per capita real retail sales, i.e., retail sales adjusted for both population and inflation (red in the graphs below). This on average turns down about a year before a recession begins. When people begin to cut back on spending for their households, unless things change it isn’t too long before it cascades into things like employment and hours of work, triggering a recession. Like many other indicators, it misfired in 2022-23 when a tsunami of supply-sided deflation created a positive “real” shock - but there is no such deus ex machina lurking now.

A second similar indicator is real personal consumption spending on goods, which is a broader measure of spending, and uses a different deflator (gold). In the graphs below below I have also normed it by population.

Finally, as I have pointed out many times, real aggregate payrolls of nonsupervisory workers has an almost perfect record of turning in the months before a recession has begun, going back over 60 years (blue). This is fundamentals-based as well; when workers in real terms are earning less money in the aggregate, they have less to spend, and this is usually an immediate trigger for a recession.

With all of that as background, here are all three indicators normed to 100 as of last December:

Neither real retail sales nor real spending on goods per capita have ever matched that level since, although their three month moving average has continued to improve in a decelerating fashion. Meanwhile, real aggregate payrolls have increased by 1.2% since, although only 0.3% of that has been during the last six months.

Typically, the immediate recession signal is when these indicators turn negative YoY. Here’s what that metric looks like now:

All of these have decelerated, several sharply, since the March-April timeframe when consumers and producers alike were front-running tariffs. None have turned negative yet, although if their present rate of deceleration continues, that is likely to occur within 4-6 months of their last datapoint for September. Next week all of them are scheduled to be updated through November, so we will have a much more current view of whether fundamental economic conditions are stormy for the average American household.

Is Thanksgiving seasonality masking a possible longer term positive regime change in jobless claims?

 

 - by New Deal democrat

This week’s update of initial and continuing jobless claims is a demonstration of two frames of seasonality: one in the immediate term, and one longer term stretching back several years. When we parse them out together, they suggest there may have been somewhat of a regime change that began in July and is still ongoing. 

Let’s start as usual with the raw numbers. Initial claims rebounded from last week’s near 50 year low by 44,000 to 236,000. The four week moving average, which irons out most of this seasonality, rose 2,000 to 216,250. Continuing claims, which it is especially important this week to note lag one week, declined dramatically, by -99,000 to 1.838 million, the lowest since early April:

Of course, the prior week was Thanksgiving, and as I wrote last week, the seasonal adjustment “expects” a big decline, but this year’s was even bigger. I expected a rebound this week, and we got it. Next week I expect a similar rebound in continuing claims.

That’s the immediate term seasonality issue.

But this week the graph above covers not just my usual frame of two years, but three years, to show that a regime change may be afoot. That’s because in the immediate post-pandemic years of 2023 and 2024, there were apparent pandemic related unresolved seasonality issues: claims rose from January until mid-year, and then declined during the second half of the year until the next January. This year the unresolved seasonality has been much more muted, especially in the second half of this year. Claims did rise into June, but then sharply declined in July, and have generally remained in that range since.

Of course, seasonality issues should be negated in the YoY% comparisons, which as I always point out, is more important for forecasting purposes. There, initial claims were lower by -1.3% this week, the four week average by -3.2%, and continuing claims by -1.9%:

As per usual, I score this as a positive, as this is what happens during expansions. In other words, it forecasts no recession in the very near term, which is good news compared with some other data we have recently received, including the JOLTS report for September I wrote about on Tuesday.

Additionally, because jobless claims lead the unemployment rate, our usual look suggests that there is no upward pressure on that rate, and if anything there is an increased likelihood of a small decline in the unemployment rate in the next several months:

That’s good news. And that plays into the possibility of a regime change in the trend in claims since the middle of this year.

Below is a graph of the YoY change in the actual number of initial claims filed plotted both weekly (thinner, gray) and monthly (thicker, blue) in 2025:

In the first half of this year, jobless claims typically were in the +10,000 range YoY. That all changed since the end of June. In the 23 weeks since, jobless claims have averaged just under -4,000 lower YoY. While I speculated during the summer that the change was school year related, and indeed there was payback in the form of sharply higher numbers early in September, the trend of lower YoY numbers has continued, even against the comparisons of very low numbers at this time last year (remember the residual seasonality of 2023-24 meant low numbers in December into January).

This suggests to me that the post-pandemic residual seasonality has been evaporating in large part, and further it is evidence, contrary to most of the monthly data we have gotten this year - including most recently from both the regional Feds and the ISM as I have documented in the last few weeks - that have suggested that the labor market may have tipped over. Instead, initial claims may point to at least a slight recovery.

Weekly data is noisy, but it always captures trend changes first. While the official monthly government data is still stale, I will pay especially attention to the regional Feds reports on employment trends in their districts, the first of which is scheduled to be released on Monday.

Q3 employment costs: probably the “least positive” since the pandemic

 

 - by New Deal democrat

The employment cost index, which was updated this morning through Q3, typically gets much less attention than the monthly payrolls report. But in this circumstance it is entitled to more notice, since the monthly data has only been posted through September as well.

Additionally, one important advantange of the Employment Cost Index is that it is adjusted for the type of job performed, while the monthly average statistics are not. Thus, for example, since many low-paid service workers were laid off during the COVID lockdowns, the latter metric was distorted by the job mix, whereas the former measure was not.

The news from this morning’s report was mixed. On the one hand, quarterly compensation increased just under 0.8%, whether measured by wages and salaries alone (blue) or by total compensation including benefits (red). On the other hand, the quarterly increase in wages was among the lowest in four years, and for total compensation it was the lowest (note: graph subtracts this quarter’s changes from both datapoints so that they norm to 0 for easier comparison):

On a YoY% basis, median wage compensation increased 3.6%, on par with the previous two quarters, while total compensation was the lowest since the pandemic, although higher than at any point between the Great Recession and the pandemic:

Although it is somewhat noisy, the employment cost index tends to in tandem with, but inversely to, the unemployment rate:

There really is not any leading/lagging relationship here, and my reading of this graph is that both median compensation and the unemployment rate were relatively stable this year though September, as the uptick in each is within the range of noise.

Finally, since the employment cost index measures wages and other compensation normed by occupation, an interesting comparison is with the Atlanta Fed’s wage tracker, which measures wage increases between those who switch jobs (presumably for better pay and/or benefits) and job stayers (updated through August):

During most of the post-pandemic era, when the unemployment rate was especially low, employees could get substantially better wage increases by switching to a new job. This year that has ended. Job switchers are doing no better than job stayers.

In sum, this morning’s data tells us that when it comes to wage growth, workers are still doing better than they were at any point during the last long expansion before the pandemic, but although the news was still positive, it was the least positive, relatively speaking, since then. This is especially true given the increase in inflation since early this year.

October JOLTS report: red flag warning for employment sector in worst report since the pandemic

 

 - by New Deal democrat

This morning’s JOLTS report for October is now the most current official monthly indicator for the jobs sector.

And it was emphatically not good. In fact, it was red flag recessionary.

In the past year, in contrast to much other data in the jobs sector, the JOLTS reports had been very much consistent with a “soft landing” jobs scenario. Not so this month.

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, and this month came right down the middle at 7.670 million. But actual hires declined a sharp -218,000 to 5.149 million, the lowest reading since the pandemic except for June of last year and August of this year.  But quits were at their worst level of all since the pandemic, down -187,000 to 2.941 million.

And the bad news doesn’t end there. Layoffs and discharges, which while noisy lead both continued jobless claims (gold) and the unemployment rate (red) rose 73,000 to 1.854 million, except for one month a four year high:

Finally, the quits rate (left scale), which typically leads the YoY% change in average hourly wages for nonsupervisory workers (red, right scale), also declined -0.2% to a post-pandemic low of 1.8%:

This suggests that nominal wage growth, which has already been trending slightly downward, is likely to decelerate further in the next several months. Since inflation has been rising, it will put a further squeeze on ordinary working Americans, and may cause real aggregate payrolls to turn negative.

This was a bad, even recessionary, report consistent with actual job losses in October, which every other non-governmental survey has suggested as well. Unfortunately, since most other new releases are stale data from September, we will have to await better data for October and November to be more confident that we have arrived at a turning point.

While capital spending increased sharply, yet more evidence of consumer weakness

 

 - by New Deal democrat

On Friday I noted that real personal spending on goods, especially durable goods, had declined in September. If we have reached a tipping point on that metric, a recession in the near future looks much more likely, even as spending on services continues.

Late last week we also got further evidence of the bifurcation between the consumer economy and the AI-fueled production economy, in the form of durable goods orders and motor vehicle sales.

Let’s look at motor vehicle sales, updated right through November first. On a month over month basis, both light vehicle (sedans, SUVs, pickup trucks) increased, as did sales of heavy weight trucks:

That’s the good news.

The bad news is when we put this improvement in perspective by looking at the long term historical data:

Heavy truck sales carry much more, and more reliable, signal than light vehicle sales, and they always turn down sharply first. Which is exactly what they have done in the past few months. The long leading signal of housing construction turned recessionary many months ago, and now the next shoe has clearly dropped.

But the other news last week, on manufacturers’ new durable and capital goods orders, told a completely different story, as both increased to among their best readings since the pandemic:

In the case of core capital goods orders, it was the best reading since the pandemic except for one month. This is a strong uptrend that began over a year ago and really accelerated this year.

But the intersection between these two metrics is production of, and spending on, consumer durable goods. Here is headline durable goods orders (blue) vs. consumer durable goods orders (red), updated through September:

As per the above, the former was in a strong uptrend. But the latter remained flat, just as it has been for two years.

So let’s compare consumer spending on durables YoY (blue) vs. manufacturers orders for consumer durables YoY (red):

Since the latter are much noisier and more volatile than the former, I have supplied the quarterly average as well as the monthly YoY change, divided by 1.5 for scale.

In general, consumer spending on durables turns first, giving manufacturers their cue to produce more or less. This was complicated by the “China shock” beginning in 1999, where goods imports from China increased sharply, and for a generation.

Finally, here is the post-pandemic look:

Consumer spending on durables increased last autumn and winter, particularly in anticipation of T—-p’s tariffs. The YoY comparisons are still positive, but less so. As per usual, the producer response occurred afterward. 

It is especially important to reiterate than the most recent durable goods and spending data has only been released through September. The motor vehicle data, as well as other types of data such as tax withholding, have indicated a sharp slowdown since. But we’ll have to wait at least one more month to see if that has truly broadened into a contraction in consumer spending on goods.

Weekly Indicators for December 1 - 5 at Seeking Alpha

 

 - by New Deal democrat

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

There are some minor changes, but no big turns in trends. But the recent change in trend that has been further reinforced is the sharp deceleration in growth in withholding tax payments that began in October. The bulk of the evidence suggests that this is not a result of end of year tax planning, but real signal of a slowdown in labor force and payroll growth.

As usual, clicking over and reading will bring you up to date on all of the relevant economic data, and bring me a little pocket change for my efforts.

Real income rises, but real spending on goods may be turning down

 

 - by New Deal democrat

Personal income and consumption is one of the two big monthly reports on the state of the average American, in addition to the jobs report. This month it has the added virtue of being the “least stale” monthly report, as it was issued only five weeks later than scheduled. Ever since “Liberation Day” in April, I have looked for the impact of tariffs on both personal spending and manufacturers’ sales. Additionally, there has been evidence since January that income and spending might be slowly rolling over in any event. This morning’s data for September added at that concern.

Nominally income rose 0.4% and spending 0.3%. But since the PCE inflation gauge rose 0.3%, real income only increased 0.1% and real spending was flat:

[Note: with the exception of the personal saving rate, and one YoY graph, all of the data in the below graphs is normed to 100 as of just before the pandemic.]

Since real spending on services (blue, right scale) rarely turns down, even in recessions, I focus on goods (red, left scale), and on an even more granular basis on durable goods spending. In September real spending on goods (red) declined -0.4%, and on durable goods (gold) even more, by -0.6%:

Because the monthly data can be noisy, I have been particularly looking at the three month average. For durable goods, this looks like it peaked in March through May. For goods spending as a whole, the three month average only increased 0.2% for July through September, and was only up 0.5% since March through May. This is very close to rolling over into contraction.

But if the real spending side of the coin merits a yellow flag, the real income and savings side was more sanguine. 

I follow the personal savings rate because just before and going into recessions it tends to turn up as consumers get more cautious. After revisions this was unchanged at 4.7% in September:

Additionally, one of the two coincident indicators from this report which the NBER pays close attention to in dating recessions is real income less government transfers. This increased 0.1% to a new record high (blue, right scale):

On a YoY basis (red, left scale) after decelerating for almost three years, the latest data shows stabilization since May. Hence the relatively good news on the income side of the coin.

Normally the second coincident metric looked at by the NBER, real manufacturing and trade industries sales, is also reported with a one month delay at the same time as personal income and spending, but this month that was not the case.

In summary, this was a mixed report. On the positive side, although growth has slowed, the positive trend in real income is intact, as is the neutral trend in personal saving. On the negative side, real spending on goods and in particular durable goods declined, with the latter having made at least a temporary peak back in springtime. The former must increase at least 0.1% (subject to revisions) in the next report in order for the three month average not to decline.

Jobless claims: Holiday seasonality enters in a big way

 

 - by New Deal democrat

The good news is, we are back to the normal weekly jobless claims releases. The really good news is that this week’s number, except for one week in 2022, was a new 50 year low! The bad news is that Holiday seasonality is very much in play, so take the good news with multiple grains of salt.

To give you an idea of how much seasonality, look at the decline that was seasonally “expected” vs. the actual number, per this week’s report:

“The advance number of actual initial claims under state programs, unadjusted, totaled 197,221 in the week ending November 29, a decline of 49,419 (or 20.0%) from the previous week. The seasonal factors had expected a decrease of 21,172 or -8.0% from the previous week.”

But to the numbers: seasonally adjusted initial claims declined -27,000 to 191,000 last week, and the four week moving average declined -9,500 to 214,750. With the typical one week delay, continuing claims declined -4,000 to 1,939,000:

To show you the seasonality at work, here are the last two years starting November 1 of non-seasonally adjusted claims (orange) vs. seasonally adjusted (blue):

A big decline in claims always occurs during Thanksgiving week. This year’s decline was signficantly bigger than the two prior years.

As per usual, the YoY% changes are more important for forecasting purposes. So measured, initial claims were down -15.1%, the four week average down -1.9%, and continuing claims up 3.6%:

Needless to say, this is positive. But I strongly suggest we wait for next week’s inevitable big seasonal increase, and average the numbers before popping any champagne corks.

ISM services for November generally positive and improving

 

 - by New Deal democrat

Probably the most important economic news this entire week was this morning’s ISM services report. Services are about 75% of the economy, and this report was for November, which means it is the most wide-ranging and current datapoint we have at the moment.

And the news on this front was almost all good. The headline number (blue in the graph below) improved to 52.6 from last month’s 52.4. Employment was less bad, improving to 48.9 from 48.2. Prices paid decelerated (a good thing) from 70.0 to 65.4. The only (slight) disappointment was that new orders (gray) were less positive at 52.9 vs. last month’s strong 56.2 [note: all graphs via TradingEconomics.com]:

My short term economic forecast gives 75% weight to this metric (gray) and 25% to the manufacturing survey (blue), and also averages over 3 months to cut down on noise. For the headline number, the three month economically weighted average was 51.0:

For the more leading new orders metric, the economically weighted three month average was 52.0:

Needless to say, both of these were expansionary if weakly so, but with evidence of a slightly improving near term forecast.

The retreat in the prices paid metric was particularly good news in comparison with preceding months:

But as with the manufacturing survey, the regional Fed surveys, and this morning’s ADP report, the bad news (even if “less bad”) is that employment appears to be contracting:

For the working and middle class as a whole, the question is whether payroll gains via wages more than make up for th apparent slight loss in the number of jobs. Unfortunately, for that at the moment we only have shadows on the wall.

Production weakens while private employment declines

 

 - by New Deal democrat

Although not published by the federal government itself, the Fed’s measure of industrial production relies on some federal data, and thus it was not updated during the government shutdown - which means that this morning’s update is likewise stale, being for September.

Industrial production has been much less central to the US economy since the “China shock,” but it remains important for the goods producing sector. In September, headline industrial production rose 0.1%, while manufacturing production was unchanged. The above graph normalizes both measures to April 2022. As you can see, between spring 2022 and late 2024, production generally declined before surging in the first six months of this year. Total production exceeded that level just barely in July, while manufacturing production has stalled without reaching that level:

Here is the longer term historical look since before the “China shock”:

Finally, I would be remiss without noting the poor ADP employment report for November this morning. The below graph shows industrial and manufacturing production for this year, together with the ADP employment trend and the official payrolls number, all normed to 100 as of April:

Employment has stalled since then, and production *may* have during this summer, but there have been plenty of noisy such periods before. So far consumer spending fueled by the surging stock market and the resulting “wealth effect” have more than counterbalanced that weakness.

Still flying blind

 

 - by New Deal democrat

There are no significant updated data releases today - which is disconcetering, considering how far behind we are over three weeks after the end of the government shutdown.

How far behind are we?

One area that is important for determining if the consumer economy is close to a turn is spending on big ticket items - vehicles and other durable  consumer goods.

Courtesy of Redbook, which updates retail shopping weekly, we know that last week was the best YoY comparison in almost three years, up 7.6%:

But this does not cover the expensive items which tend to turn down first. Real retail sales, which do include motor vehicles, have been updated through September (blue), but manufacturers new orders for consumer goods are only updated through August (red):

Even worse, while nominal manufacturers sales have been updated through August (blue), but real manufacturing and trade sales (red) are only available through July:

Nominal motor vehicle sales have just been updated this morning through August:

And the BEA’s last update of the number of light weight vehicles (blue) and heavy truck sales (red) is only available through August as well:

The lag is just as bad for the very important housing sector, where housing permits, sales, and units under construction are only updated through August:

And real residential fixed investment as a share of real GDP was last updated for Q2:

But the biggest laggard of all is the QCEW, the “gold standard” for growth in the jobs sector, to which the monthly reports are ultimately benchmarked, which was last updated in August for Q1:

Hence my continued focus on the regional Fed manufacturing and services reports, as well as the nationwide manufacturing and services ISM surveys, as it does not appear this situation is going to be remedied for another month at least.