Economic data mixed

As the Federal Reserve prepares for its next meeting on December 18, it will closely evaluate incoming economic data to help it decide whether to cut rates or wait until conditions are riper. Last week gave it a good update on the labor markets, and this week will give it more inflation data to chew on. 

Helped by the end of the Boeing strike, the economy added 227,000 new jobs in November. Employment trended up in health care, leisure and hospitality, government and social assistance, but was partly offset by losses in general merchandise and electronics and appliance retailers. There was little or no change in employment in other major industries. The unemployment rate rose from 4.1% to 4.2%, back to the August 2024 level, but below the 4.3% post-pandemic high reached in July. 

As usual, there were a couple puts and takes in the report. The prior two months saw positive revisions of 56,000 jobs, and average hourly earnings rose 0.4%, keeping the yearly gain at 4.0%, which continues to outpace consumer price inflation that clocked in at 2.6% in October. However, manufacturing jobs rose only 22,000, but excluding the Boeing returnees, it was a drop. Factoring in slightly higher weekly jobless claims, the labor markets continue to be strong, but somewhat less so.

Other data released last week also point to a more mixed economic picture. Manufacturing surveys were stronger, with lower prices paid and higher new orders, while surveys of the much-larger services sector were softer, with higher prices paid, lower employment and new orders. 

The University of Michigan consumer sentiment survey continued the mixed results. Sentiment rose, driven by current conditions, but expectations fell sharply. One-year forward inflation expectations rose from 2.6% to 2.9%, but longer-term expectations fell, from 3.2% to 3.1%. At this point, markets fully expect a Fed rate cut at its next meeting, with another cut by March. Incoming inflation data will help guide policymakers’ next move.