Thursday, November 17, 2022
A plethora of economic data is out this Thursday morning, including nearly every Thursday’s Initial Jobless Claims report (not next week, though — that’s Thanksgiving Day): 222K new claims was slightly below the 225K expected, and below the modest upward revision of 226K the previous week. Continuing Claims ticked up to 1.51 million two weeks ago (a week in arrears from new claims) from 1.49 million prior. Though the longer-term jobless claims are encroaching on their highest levels since April.
Also, Housing Starts for October came in at 1.425 million seasonally adjusted, annualized units, a smidge above the 1.41 million expected but below the 1.44 million the previous month. This amounts to -4.2% year over year, lower than the estimated -2%. Year over year, single-family starts are down -22% in October, -5% lower than the September print. Clearly, this is a market in decline.
Building Permits for October, often seen as a proxy for future starts, came in at 1.526 million, higher than the 1.50 million expected but lower than September’s 1.56 million. Today’s figure is still the lowest we’ve seen in almost two years, and once again we’re seeing a widening rate of new permits year over year when we compare October to September. Again, it’s a slowing market overall — the first and most obvious recipient of the pain that comes from the thumbscrews of higher interest rates over the past nine months.
The Philly Fed Manufacturing Survey for November posted a reversal of sorts from what we saw in Empire State numbers earlier this week: -19.4 on Philly Fed headline is more than 3x worse than the -6.0 analysts were looking for. This follows an unrevised -8.7 from October, and makes it five of the last six months with a negative print. Further, this is the worst monthly read of the year; in fact, it’s the lowest since May of 2020.
Long story short, we’re looking at a uniform retraction in the inflation metrics and the overall economy… with the exception of the labor market, writ large. To reiterate, longer-term jobless claims ticking back over 1.5 million is a sign that these tactics from the Fed are now beginning to have an effect. In fact, if the big layoffs we’re starting to see in the Tech sector are any indication, we might expect overall labor market figures to worsen in the weeks and months to come.
This is still the cure for what ails us, and the narrative has not altered: it’s not a matter of whether the economy cools inflation based on the current trajectory of the Fed, but when. And, importantly: how far? Do we continue to see jumbo rate hikes in December and beyond, which would take us 150 basis points (bps) higher than we find ourselves currently, or will economic numbers satisfy the monetary policy body enough to see a slowdown in rate hikes? There’s a trace of doubt about this in today’s pre-market: the Dow is -300 points, the S&P 500 -40 and the Nasdaq -140 points.
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Housing, Manufacturing Weaken; Jobless Claims Steady
Thursday, November 17, 2022
A plethora of economic data is out this Thursday morning, including nearly every Thursday’s Initial Jobless Claims report (not next week, though — that’s Thanksgiving Day): 222K new claims was slightly below the 225K expected, and below the modest upward revision of 226K the previous week. Continuing Claims ticked up to 1.51 million two weeks ago (a week in arrears from new claims) from 1.49 million prior. Though the longer-term jobless claims are encroaching on their highest levels since April.
Also, Housing Starts for October came in at 1.425 million seasonally adjusted, annualized units, a smidge above the 1.41 million expected but below the 1.44 million the previous month. This amounts to -4.2% year over year, lower than the estimated -2%. Year over year, single-family starts are down -22% in October, -5% lower than the September print. Clearly, this is a market in decline.
Building Permits for October, often seen as a proxy for future starts, came in at 1.526 million, higher than the 1.50 million expected but lower than September’s 1.56 million. Today’s figure is still the lowest we’ve seen in almost two years, and once again we’re seeing a widening rate of new permits year over year when we compare October to September. Again, it’s a slowing market overall — the first and most obvious recipient of the pain that comes from the thumbscrews of higher interest rates over the past nine months.
The Philly Fed Manufacturing Survey for November posted a reversal of sorts from what we saw in Empire State numbers earlier this week: -19.4 on Philly Fed headline is more than 3x worse than the -6.0 analysts were looking for. This follows an unrevised -8.7 from October, and makes it five of the last six months with a negative print. Further, this is the worst monthly read of the year; in fact, it’s the lowest since May of 2020.
Long story short, we’re looking at a uniform retraction in the inflation metrics and the overall economy… with the exception of the labor market, writ large. To reiterate, longer-term jobless claims ticking back over 1.5 million is a sign that these tactics from the Fed are now beginning to have an effect. In fact, if the big layoffs we’re starting to see in the Tech sector are any indication, we might expect overall labor market figures to worsen in the weeks and months to come.
This is still the cure for what ails us, and the narrative has not altered: it’s not a matter of whether the economy cools inflation based on the current trajectory of the Fed, but when. And, importantly: how far? Do we continue to see jumbo rate hikes in December and beyond, which would take us 150 basis points (bps) higher than we find ourselves currently, or will economic numbers satisfy the monetary policy body enough to see a slowdown in rate hikes? There’s a trace of doubt about this in today’s pre-market: the Dow is -300 points, the S&P 500 -40 and the Nasdaq -140 points.
Questions or comments about this article and/or its author? Click here>>