Weekly Market Update: November 1, 2024

What’s Up With Employment In The U.S.?

Join me in our ‘Weekly Market Update’ to decipher what to expect in the coming weeks & months.

Happy Friday! Brian Manning here with the weekly update. Let’s get right to it.

Monday this week was really a quiet news day. I would say it’s just the calm before the storm of a critical week of data.

On Tuesday, this week, we got the jolts report. This is job opening and labor turnover. This looks at job openings across the country. It was expected that we’d see 8 million job openings in September. We had 7.4 million job openings in September. So, I would say it’s a weaker-than-expected report. It shows less than expected job openings across the country. We also look at the quit rates here. So, the quits rate was at 1.9% so this would be how many people were quitting their jobs to move from one employer to another. Typically, you see a lot of labor turnover. You see a high quit rate, or a lot of movement and jobs here when employers try to steal employees from other companies. This is the lowest since 2015 which shows softness in the labor market. Also, on Tuesday this week, we got consumer confidence. Consumer confidence was at a level of 108.7- a blockbuster number. This would show that across the country, consumers are extremely confident. It’s kind of crazy, because you talk to a lot of people, and they’re maybe not as confident as you would think, especially compared to the data in this report. And I wonder if it’s from what’s called the wealth effect. The wealth effect is when someone looks at their investment accounts, or 401K, or whatever it would be, they look at their investments, and the stock market has done well over the last several months. So, these numbers are at all-time highs. The wealth affected me, and when a consumer looks at this, they see their financial portfolio at an all-time high, and that makes them very confident in the marketplace. Kind of interesting to see such strong consumer confidence where it’s not translating out everywhere else.

Wednesday this week, we got the ADP report. I can’t believe it’s already the employment week. The first week of every month, we get employment data. First Wednesday, we get ADP. The first Friday, we get BLS. So, ADP, we expected 115,000 jobs created in the month, and we got 233,000 jobs created. That was a blockbuster report. But if we look at this, we want to pay attention to the fact that it is hiring season. So, Amazon came out, and said, leading into the holidays, they were going to add in 250,000 employees. UPS came out, for example, and they said they’re going to add in 125,000 employees. Target’s going to add in 100,000 people. Another one to think about would be like Spirit of Halloween. Spirit of Halloween is going to bring on 50,000 full-time employees to get through Halloween, and then they let them all go. So, I wonder if that ADP jobs report is as strong as the you know economy makes it seem because you have all these employers right now hiring people for holidays. Spirit of Halloween is a great example in there.

Thursday is when we get PCE. This is the personal consumption expenditure. This is the Federal Reserve’s favorite gauge of inflation. So, if we look at this, the headline number was only up .175% on a year-over-year basis and has moved from 2.3% down to 2.1 so the headline number includes everything, and that’s good to see the movement there. But what’s looked at is going to be the core rate. So, the core rate of inflation strips out volatile items such as food and energy. This was a .25% and we got a reading at 2.651 so the way this works is the numbers get rounded. If you’re at point five or higher, you move up a number. So at a reading of 2.651 that gave us a reading of 2.72 so what we’re looking at here, unfortunately, in the rounding, you didn’t see a lot of progress of inflation, but if you look at the specific numbers, not how they round out, we saw another improvement of inflation there. Also, we had shelter, something we’ve been talking about for a couple of years now, shelter costs moved from 5.3% down to 5.1 this is important because shelter is a huge component of the inflation number. So, to see continual downward movement there is good but shelter still lags. If we look at core logic, core logic would say the shelters at a rate of 2.4% so the shelter component of these inflation readings is still elevated. It’s still taking a very long time to come down. It is moving, but it’s just taking quite a while. Also, we got September pending home sales, and this was exciting to see, on a month-over-month basis, September pending home sales were up 7.4% the reason why this is exciting is because that’s the time when we had mortgage rates drop, and it goes to show you, then when eventually you do see a reduction in mortgage rates, that there’s a ton of buyers in the sidelines that are waiting when this reduction came in for a very short period, a lot of buyers hopped in, and then we saw pending home sales, to me, skyrocket, because that’s a high number to see on a month over month basis.

Today, the first Friday of every month, we get the BLS report which stands for the Bureau of Labor Statistics. This is our Employment Report for October. It was expected that we have 113,000 jobs created in October. Instead, we got 12,000 -that’s a lousy report. We have not seen the impact in the bond market like we thought we would, because it’s kind of a lousy report, but investors in general right now are just skittish. What I look at here and something that baffles me and I can’t understand this would be the prior month’s revision. In the two prior month revisions, we had them reduced negatively, or jobs down by 112,000 so if we look at August when that report came out, that report came out at 159,000 jobs that were created. And now, after the revisions, they come back and say, “Oh, we’re so sorry we didn’t do this correctly the first time around. Now we have these revisions, and we only had 78,000 jobs created”. This baffles me, and it’s rather frustrating, because if you look at the run-up we’ve had in interest rates, this all starts from last month’s employment report, which came out much stronger than expected, like 230 or 10 50,000 jobs created, and now you’re seeing that number revised lower. The challenge that we have is that the markets are going to react immediately when the data comes out, not based on the revision. Right now, we’ve seen mortgage rates spike and go up over the last month, and that’s primarily because of that prior month’s strong on-paper employment report, but now they keep coming back and say, “Oh, we’re so sorry we messed up. We didn’t mean to count the numbers so high, and we keep reducing them lower”, and I’m not going to be surprised over the next month or so if we continue to see those employment numbers move lower as well. It’s a little frustrating to see mortgage rates move higher based on the immediate data that comes out, but then to have a revised lower. Because if you can only imagine, if the numbers that we’re seeing right now were actually the numbers that were released at the time, mortgage rates would not have spiked. So, unfortunately, economics are tied into all this, and the data is just kind of wonky. I would say, though, with the employment report that we got and the information we’re seeing this week, we have the Federal Reserve conclusion of a meeting next week on November 7, it’s still very likely you’re going to see a Fed rate cut there. Market anticipation is going to be .25% or quarter-point rate cut. We’ll have to see what happens. Next week is going to be a volatile week. You have elections in there, you have a Federal Reserve meeting, you have hopeful Fed rate cuts. We’ll have to wait and see what happens. But for sure, next week’s update is going to be jam-packed and an exciting one.

A couple of things. Fall Fiesta is coming up. Second Thursday in November. That’s November 14 and is taking place at T/aco here in Boulder. This is our 10th anniversary. I can’t believe it. 10 years ago, we started at T/aco. We’re super excited to come back to our roots and be at T/aco again. All-you-can-eat tacos, open bar, margaritas. It’s going to be a ton of fun. The non-profit we’re raising money for this year is Trees, Water & People. They’re a phenomenal non-profit, run by a personal friend of ours based in Fort Collins. Their information is on our website. If you want to look at the incredible help that they do across the country and in other countries as well. So please take a look at them. Come on out and have some tacos on us. Margaritas on us. A great reason to celebrate. And let’s raise some money for trees, water people. Happy Friday. I hope everybody has a great day.

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