Latest Insights

The market received key updates on the state of the US economy this week; the November employment report was released this morning and indicated that the US economy added 263,000 jobs last month, exceeding the consensus estimate from economists of 200,000. Gains were broad-based across a number of industries, with leisure and hospitality leading the job growth, followed by health care and government (mostly local government), respectively. The unemployment rate was unchanged at 3.7% and the underemployment rate eased to 6.7% in November. A point of interest in the report was the unexpectedly high average hourly earnings jump of 0.6% month-over-month, and 5.1% over the last year, which might have received a boost from severance packages resulting from recent layoffs.

Inflation continues to run well above the Fed’s longer-run target of around 2.0%. The Consumer Price Index (CPI) was up 7.0% year-over-year in December, versus up 6.8% year-over-year in November. Core CPI (CPI less food and energy) was up 5.5% year-over-year in December, versus up 4.9% in November.

Recent inflation data releases from both the Consumer Price Index (CPI) and Producer Price Index (PPI) have been constructive for market participants, supporting asset prices and adjusting expectations for the future path of monetary policy. Last Thursday, November 10th, CPI was released, and both the headline and core numbers came in moderately below consensus expectations, pushing down the y/y year numbers for both headline and core CPI. The October y/y headline number was 7.7% versus 8.2% y/y in the prior month, and 6.3% y/y for the core number, versus 6.6% in the prior month. The trends in CPI inflation are poised to continue to improve as the elevated readings from November and December in 2021 roll out of the index. The PPI index was released on November 15th and the prints were also below consensus expectations on the headline and core numbers, lowering the y/y trends from the prior month. Both headline and core PPI ticked down 0.4% on a y/y basis to 8.0% and 6.7%, respectively. The PPI, consistent with the CPI, is also poised to benefit from high monthly readings of the prior year rolling out of the index in coming months.