Last Friday we learned the US created 263,000 new jobs in November. The number has certainly been trending downward, however the wage component has many talking this morning. Hourly earnings came in at +0.6% versus the estimate of 0.3%. I don’t recall the last time I was rooting for the US to create fewer jobs!!
Wages Continue to Rise!
I think it’s reasonable to expect wages will continue to increase, for the time being. We still have more jobs available than workers, which translates into bargaining power for new hires. I do expect the above average trend of increases to end sometime in the near future, as higher rates will continue to slow the rate of growth.
One thing is for certain: conquering inflation is not easy, as there are many moving parts that are challenging to interpret correctly, except, after the fact.
The Fed last week suggested the size of rate increases may be slowing as soon as it’s December meeting. Most expect the rate of increase to be announced at .50% on December 14th. One day prior, we’ll hear the November Consumer Price Index number. Hopefully all components of the CPI will point further in the correct direction.
Fed in 2023?
What will the Fed do in 2023? Many believe the Fed will raise rates two additional times, at .25% each. At this point, I would expect the Fed to raise .50% at the first 2 meetings of 2023, and have no thoughts beyond that, as the Fed will wait for the more economic data.
Most agree the Fed will stop raising rates in early 2023, however many believe the Fed will be forced to lower rates as the year progresses. The Fed is suggesting however, that after rates have been fully raised, they may need to keep rates elevated for longer to conquer the lasting effects of inflation.
Oil continues to be front & center news. Between OPEC suggesting it will continue to keep production down, the European Commission instituting a price cap on oil, China perhaps re-opening, and our Strategic Reserve depleting, it should not be a surprise that the price of oil will move higher.
This comes at a time when we’re finally seeing a little relief with overall inflation. So very simply… it’s not a good time for the price of transportation to increase.
Markets Moved Higher Last Week
Since 1980, December has the highest winning percentage of positive stock–market performance. Stocks have risen 74% of the time, with an average gain of 1.4%.
Last week we continued higher with the Dow up .41%, the S&P 500 1.19%, the Nasdaq 2.12% and the Russell 2000 up 1.33%.
International markets have also been participating in the recent move higher. Developed International stocks rose 1.06% and Emerging Market stocks 3.51%.
The 10-Year US Treasury yield ending the week at 3.50%. It’s been a sharp drop in yields on the 10-year from 4.23%. Most bond values have moved higher with the 10-year yield moving lower. Certainly, good news for now.
Including today, we have 19 trading days left in 2022. The predictions are starting to mount about what prognosticators believe is in store for 2023. I will certainly be sharing my 2023 thoughts over the next few weeks. As I am optimistic in the intermediate term, I do have concerns about corporate profits in the 1st half of 2023. Very simply, the higher cost of capital, the lower return on investment, at least initially!!
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