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Big Inflation Data Morning: PCE, Income & Spending, Jobless Claims

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In the most definitive inflation data of this week — perhaps of the past few weeks — Personal Consumption Expenditures (PCE) for October were flat, 0.0%, from an unrevised +0.4% the previous month, and the lowest monthly print since mid-2022. Stripping out food and energy prices, the core print comes in at +0.2%, down 10 basis points (bps) from September. This is a clear sign the Fed’s high interest rates are having a fundamental effect on the economy.

Year over year PCE reached +3.0% on headline, down from +3.4% the previous month (and the two months prior to that), while core year over year was in-line with expectations at +3.5%, down 20 bps from the September read. This is the lowest print we’ve seen since April 2021 — more proof that the Fed’s “higher for longer” mantra on interest rates is doing its job squeezing out inflation.

Nominal Personal Income for October came in as expected, +0.2%, and 10 bps lower than the previous month’s headline. Same with nominal Personal Spending: +0.2%, as expected, but down from an originally reported +0.7% back in September. Real Spending, adjusted for inflation, was also +0.2%, but 10 bps higher than expectations. Combining these two economic reports, we can clearly see that while inflation continues to be tamed, income and spending are keeping relatively solid — or at least not falling off the table.

Initial Jobless Claims were slightly below what analysts were looking for: 218K versus 220K anticipated. This is up +7000 claims from the previous week, but still well within the narrative that domestic employment is staying healthy. Over this past summer, we had seen new claims surge over 260K, and it looked for a time that the labor market was finally beginning to erode. But now it appears 220K is the fulcrum on new jobless claims, and if this maintains, we should continue down this path of healthy employment.

Continuing Claims, however, are a different story: we shot up to new 52-week highs to 1.927 million longer-term jobless claims, looking to be on a trajectory toward the psychologically meaningful 2 million, which we haven’t seen since 2021. The previous week’s 1.841 million represents a slight upward revision, and even with a strong move from 1.66 million back in the second week of September, we don’t always tack northward every single week. But this is a metric well worth paying attention to; that previously assumed labor market erosion may at last be upon us, at least over the longer term.

Pre-market futures have taken this all in stride: the Dow is currently up +245 points, the S&P 500 is +15 and the Nasdaq is +60 points — almost exactly where they stood ahead of all these economic reports hitting the tape. In all, we’re seeing mixed results here: PCE — the Fed’s preferred inflation gauge — is currently behaving as well as can be expected, spending and income remain reasonably OK, but longer-term joblessness appears to be a developing economic headwind.

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