Week of December 8, 2014

MARKET STATISTICS: Weekly Change

ECONOMIC STATISTICS:

WEEKLY ECONOMIC REPORT

DECEMBER 8, 2014

Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org

CHRISTMAS COMES EARLY FOR U.S. JOBS U.S. Employment Report – November The unemployment rate stayed at six-year lows of 5.8% as household survey employment was nearly flat.

However, this followed a massive (683,000) gain the prior month, and hence no retracement just shows how sturdy the labour market is. Nonfarm payrolls vaulted 321,000 in November, the most since early 2012, laying to rest any concerns that job growth is slowing. The 3-month average of 278,000 is the fastest since the early days of recovery.

Every major industry cranked out more jobs in the month, even the federal government. Average hourly earnings rose 0.4% in the month, pushing the yearly rate up slightly to 2.1%.

Aggregate weekly work hours jumped 0.6% in November, lifting the two-month annualized rate to 2.8% above Q3’s average. Meanwhile, the U.S. trade deficit disappointed in October, narrowing just slightly to $43.4 billion in October.

While exports rebounded 1.2%, but this did not fully retrace the prior month’s drop. Imports rose 0.9% after a couple of flat months.

This report has lots of upsides. This could translate to a festive season for U.S. workers, which should translate into a jolly time for retailers, and the economy.

WEAK CANADIAN DATA OVERSHADOWED BY STRONG U.S. Canadian Employment Report – November Canadian Merchandise Trade – October Canadian unemployment dropped 10,700 in November, below expectations. However, this was not entirely unexpected given the huge gains over the prior two months. The one small positive is that all of the losses were part-time (-16,300) while full-time positions rose 5,700. The private sector shed 45,600 jobs, while the public sector (22,600) and self-employment (12,300) recorded gains. As a result, the jobless rate was pushed up a tick to 6.6%. Hours worked dove 0.5%, which will represent a challenge for Q4 GDP growth unless productivity gains accelerate. Wage growth was steady at a very subdued 1.5%y/y. As well, involuntary part-time employment fell from a record high, though it remains relatively high.

Canada’s merchandise trade figures showed a $99 million surplus, close to the consensus call. Exports rose just 0.1% while imports climbed 0.5%. Adjusting for price changes, export volumes fell 0.7% and imports were down 0.3%. This is not a good start to Q44 for trade; we’ll need to see some improvement in November if trade is going to add to GDP growth in the quarter.

The Canadian data were not particularly favourable (job loss, smaller trade surplus), but the huge U.S. job gain means Canada will remain outside the spotlight and play second fiddle.

WEEKLY ECONOMIC REPORT

DECEMBER 8, 2014

Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org

U.S. MANUFACTURERS KEEP BUSY U.S. Institute for Supply Management Manufacturing Index – November U.S. manufacturing ISM was little changed in November, surprisingly. The index slipped 0.3 pts in the month (expectations were for a 1 pt decline) to 58.7, just spitting distance from October’s (and August’s) three and a half year high of 59.0. New orders added 0.2 pts to reach 66.0, the highest since August and encouraging for future activity.

Production slipped 0.4 pts from decade high, now at 64.4. Inventories fell 1 point to 51.5, and supplier deliveries recorded 0.6 pts to 56.8. Employment slipped 0.6 pts to 54.9, suggesting that November factory payrolls slowed but hiring continued.

Prices paid took a nosedive, hitting 44.5 in November from 53.5 the prior month, and also the lowest since June 2012. Interestingly, new export orders actually rose for the first time in three months, despite slower global demand.

U.S. manufacturing continues to improve, in sharp contract to almost everywhere else (with a couple of exceptions) – Euro Area’s manufacturing PMI is at a 17 months low of 50.1, as Germany contracted again; Japan is at a 2-month low of 52.0 and China is just barely above 50; Brazil contracted for the 7th time in the past eight months.

U.S. NONMANUFACTURING IMPROVES U.S. Institute for Supply Management Nonmanufacturing Index – November Like U.S. manufacturing, the U.S. nonmanufacturing ISM beat expectations in November. The index surprisingly improved last month, the first increase in three months and at 59.3, is just 0.3 pts from a 9-year high. New orders (+2.3 pts), business activity (+4.4 pts) and supplier delivery delays (+5.0 pts) all registered increases, whereas employment fell (-2.9 pts) but still indicates that employers are hiring, but only at a slower rate.

With all of the talk about a recession in Japan, possible recession in Eurozone and Russia, the U.S. economy continues to look much more attractive.

THE WEEK AHEAD Canadian Housing Starts – November - Monday, December 8, 2014 at 8:15am

Canadian Building Permits – October - Monday, December 8, 2014 at 8:30am

U.S. Wholesale Trade – October - Tuesday, December 9, 2014 at 10:00am

U.S. Retail Sales – November - Thursday, December 11, 2014 at 8:30am

UPCOMING CSIT MEETINGS Tuesday, December 9, 2014 at 3:30pm - Team-Wide Meeting WEEKLY ECONOMIC REPORT

Thursday, December 11, 2014 at 3:30pm - Guest Speaker (Mr. Michael Wiggan) DECEMBER 8, 2014

Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org