When Good News Is Good News – December 9, 2019
The U.S. economy generated a surprisingly strong 266,000 new jobs in November. The jobless rate fell from 3.6% to 3.5%, tying a 50-year low per the U.S. Bureau of Labor Statistics.
The graph below is a three-month average of nonfarm payrolls, which helps iron out monthly volatility. Note the acceleration over the last four months.
Even if we throw out the 41,000 returning autoworkers who were on strike (Wall Street Journal), it’s still an impressive report. Put another way, good news for workers is good news for investors, as the Dow1 posted a 337-point gain (1.22%) on the news (MarketWatch).
The upbeat report is unexpected given mixed economic data, but it bodes well for the economy heading into the holiday shopping season. You see, more folks are working, and wages are rising, which supports consumer confidence. In turn, rising confidence is more likely to aid consumer spending, which makes up nearly 70% of the economy (U.S. BEA data).
In particular, consumer sentiment has turned up sharply since August. The latest report, which was released last Friday, showed a strong increase in the early December reading. At 99.2, we’re not far from the current expansion’s cyclical high.
What does it all mean? Pessimism in the summer that the economy might slip into a recession appears to have been unfounded, especially given robust job numbers.
It’s not that all the economic data have been roses and sunshine. Weak spots in the economy remain. But surprisingly strong job growth is at odds with surveys that suggest business confidence is under pressure from U.S.-China trade tensions.
On the one hand, business executives say they are concerned; on the other hand, their companies are hiring.
Further, consumer sentiment is improving. That’s not a signal economic growth is about to contract. While leading economic indicators have been soft, job growth and upbeat sentiment suggest that the final month of the year could end on a favorable economic note. Stay tuned.
Created 2019-12-09 15:26:23