Weekly Economic Update: December 10, 2024
Presented by Nicholas Wealth Management
It was hard to find anything to complain about last week, unless the suddenly colder weather made the low-tire light on your dashboard come on. But is that really a problem — or do we just need something to complain about no matter how good things seem?
The week after Thanksgiving was one of those rare times when the market literally gives us an opportunity to take a deep breath and smile. All three indices posted all-time highs: the S&P 500 closed in on 6,100 points and the Nasdaq came tantalizingly close to piercing 20,000.1,2 Plus, the Dow broke through the 45,000 level; it was only four years ago when that index hit 30,000.3
We also heard from Federal Reserve Chair Jerome Powell, who spoke at The New York Times DealBook Summit. Powell encouraged investor confidence that the Fed will cut interest rates at the December meeting. He also touted a U.S. economy in “remarkably good shape” as a reason he feels the Fed can “afford to be a little more cautious” in its interest-rate-cutting path. His comments seemed to help propel markets higher.4
Bitcoin reached $100,000 for the first time last week, a milestone for the cryptocurrency.5 All three indexes set records on Wednesday, and after a brief break on Thursday, markets were mixed but mostly up to close out the week as a goldilocks November jobs report kept us on track for rate cuts later this month (see more below). Also in the good-news category: Consumers appear to be turning out strong for the holiday season, despite higher prices and credit card balances.6 Holiday spending had some folks worried, but so far it appears to be in good shape and not a cause for concern.
Not even the geopolitics grinch was able to sour the mood. When South Korean President Yoon Suk Yeol announced he was imposing martial law on Tuesday, the move was quickly and unanimously reversed by the National Assembly a few hours later.7 That’s not to say something more serious won’t happen, but in a normal market, a severe political disruption in a significant world economy would cause the markets to at least pause — which didn’t happen.
We’re caught in an upward spiral which defies most conventional logic. We’ll take this dream state for as long it lasts with the understanding that markets will readjust at some point. For now, this sure feels good.
All about jobs
Remember the October jobs reported early last month just before the election? Yeah, us neither. It was such a bad report that it hardly merits mention, but we’ll remind you anyway. A whopping 12,000 jobs were created according to the Bureau of Labor Statistics (BLS), the worst reading since December 2020.8
It seems “forecasting” took the month off last time, because the forecast in October was for an additional 125,000 jobs (and we got 10% of that). Forecasters got closer for the November report; the consensus was for +214,000 and the actual number was +227,000.9 That’s not super-hot but solid and a lot healthier than last month’s report.
October must have thrown all the forecasting professionals for a loop, because the folks at ADP were pretty hard to predict, too. The forecast called for +165,000 new jobs in the private sector for the month; the actual number turned out to be +146,000, not bad and close enough to satisfy the professionals.10
Finally, U.S. job openings for October (this number always lags a month behind) remained steady at about 7.5 million — a lot lower than the 12+ million we saw 2.5 years ago.11 The jobs reports told the markets what they wanted to hear: that the economy is still solid and the unemployment rate remains high enough (4.2%) to keep the Fed on track to cut rates this month.12
Coming This Week
- Expect things to start winding down in the next few weeks as we end the year. But before it does, we’ll still get some meaningful data this week.
- Wholesale inventories and U.S. productivity will be reported on Monday and Tuesday, respectively. We will get MBA mortgage applications on Wednesday.
- The major data points will be the Consumer Price Index (CPI) and Core CPI. Last month, CPI stood at 2.6%, largely on lower energy and food costs. However, Core CPI (which strips out energy and food) stood at 3.3%.13 Food and energy are volatile but are trending in the right direction. We need to see costs come down in other areas, as well.
- The other inflation shoe will drop on Thursday in the form of the Producer Price Index (PPI) and Core PPI (2.4% and 3.5% last month, respectively).14 PPI should be visibly lower than CPI; if they’re on top of each other, as they are now, it says producers have nonexistent or super-thin margins with little to no room to lower costs. If this persists, costs will likely go up and inflation will turn higher, putting further pressure on the consumer and economy.
Sources:
1 Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed Dec. 8, 2024.
2 Yahoo! Finance. “NASDAQ Composite (ˆIXIC).” https://finance.yahoo.com/quote/%5EIXIC/. Accessed Dec. 8, 2024.
3 Yahoo! Finance. “Dow Jones Industrial Average (ˆDJI).” https://finance.yahoo.com/quote/%5EDJI/. Accessed Dec. 8, 2024.
4 Bryan Mena. CNN. Dec. 4, 2024. “Powell says a strong US economy is letting the Fed be ‘cautious’ about cutting interest rates.” https://www.cnn.com/2024/12/04/economy/fed-chair-powell-trump-dealbook/index.html. Accessed Dec. 4, 2024.
5 Yahoo! Finance. “Bitcoin USD (BTC-USD).” https://finance.yahoo.com/quote/BTC-USD/. Accessed Dec. 8, 2024.
6 Bill McColl. Investopedia. Dec. 3, 2024. “Amazon Kicks Off Holiday Shopping Season With Record-Setting Numbers, It Says.” https://www.investopedia.com/amazon-kicks-off-holiday-shopping-season-with-record-setting-numbers-it-says-8754555. Accessed Dec. 8, 2024.
7 Yoonjung Seo, et al. CNN. Dec. 3, 2024. “Martial law reversed in South Korea after president’s surprise decree sent shockwaves.” https://www.cnn.com/2024/12/03/asia/south-korea-martial-law-intl/index.html. Accessed Dec. 8, 2024.
8 Jeff Cox. CNBC. Dec. 5, 2024. “There’s an important jobs report coming Friday. Here’s what to expect.” https://www.cnbc.com/2024/12/05/theres-an-important-jobs-report-coming-friday-heres-what-to-expect.html. Accessed Dec. 8, 2024.
9 U.S. Bureau of Labor Statistics. Dec. 6, 2024. “Employment Situation Summary.” https://www.bls.gov/news.release/empsit.nr0.htm. Accessed Dec. 8, 2024.
10 ADP Research. Nov. 2024. “ADP® National Employment Report.” https://adpemploymentreport.com/. Accessed Dec. 8, 2024.
11 U.S. Bureau of Labor Statistics. Dec. 3, 2024. “Job Openings and Labor Turnover Summary.” https://www.bls.gov/jlt/. Accessed Dec. 8, 2024.
12 U.S. Bureau of Labor Statistics. Dec. 6, 2024. “Employment Situation Summary.” https://www.bls.gov/news.release/empsit.nr0.htm. Accessed Dec. 8, 2024.
13 U.S. Bureau of Labor Statistics. Nov. 13, 2024. “Consumer Price Index Summary.” https://www.bls.gov/news.release/cpi.nr0.htm. Accessed Dec. 8, 2024.
14 U.S. Bureau of Labor Statistics. Nov. 14, 2024. “Producer Price Index News Release Summary.” Accessed Dec. 8, 2024.
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