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It’s not often that I can share anecdotal evidence for the data points we write about in this report, but I actually ventured out to a major mall in our area for the first time in several years this weekend. While it’s not quite as crowded as I remember it being in my younger days (Amazon and their competitors make everything so convenient), retail appears to be far from dead. The Apple Store®still looked quite crowded and the line to visit St. Nick stretched a long way. It’s one data point from the suburbs of Detroit, but consumers appear to be feeling pretty good about the way things are going.

Manufacturing could be better, but the November jobs report points to a reason for that optimism. Let’s get into the headlines!

Headline News

ISM Manufacturing Index

Overall activity in the manufacturing sector fell into deeper contraction in November as the survey of manufacturers fell from 48.3 points to 48.1 points. As a reminder, an index number over 50 indicates growth. Below that and there’s shrinking in the manufacturing sector.

New orders fell at a faster pace last month. This is down 1.9 points to come in at 47.2. New export orders fell into contraction, going down 2.5 points to 47.9. Manufacturing production is still slowing, but not as fast as it was in October, having picked up 2.9 points to settle at 49.1.

The backlog of orders is decreasing, down just over a point at 43. Because there’s no buildup in backlogs, there’s not as much incentive to hire. Manufacturers are cutting back on their workforce at a faster pace as this is down more than a point at 46.6. Inventories continue to fall, down 3.4 points to 45.5. Finally, imports are still falling, but at a slower clip, up three points to 48.3.

About the only positive in the report was that supplier deliveries to manufacturers have increased, coming in at 52. It doesn’t end on a positive note either; 13 of 18 manufacturing industries reported shrinking rather than growing in November. The deepest cuts were in wood products, printing, furniture and related products along with textiles.

MBA Mortgage Applications

Despite the average interest rate on a conventional 30-year fixed mortgage remaining flat at 3.97% compared to last week, applications were down 9.2% overall.

Looking first at applications to refinance, these were down 16% on the week. While the majority of applications are still to refinance in this low-rate environment, the drop was enough to drive down the share of refinance applications from 62% to 59%.

Meanwhile, purchase applications fell 33% from the week prior. While this is still 1% higher than they would normally be when seasonally adjusted, home buyers applied for 24% less mortgages than they did in the same week last year.

International Trade

The U.S. trade deficit in October was down 7.6% to $47.2 billion. Unfortunately, that’s not due to the fact that exports were up so much as the fact that imports were down quite a bit.

Starting with imports, these were down 1.7% to $254.3 billion. Imports of goods in particular were down $4.5 billion to $204.1 billion. Among those categories that saw drops included a $2.4 billion loss for consumer goods imports. Within this category, there was an $800 million drop in pharmaceuticals, a $400 million drop in cell phones and household goods, a $300 million in lost apparel imports and another $300 million lost in toys, games and sporting goods. November begins the holiday season, so we’ll see if this consumer goods number picks up. Vehicle and accessory imports were down $1.8 billion. On the services side, these imports were up $100 million to $50.2 billion. Travel imports were up $100 million as were business services imports. Transport was down $100 million in this services category.

On the export side, these were down 0.2% to come in at $207.1 billion. Consumer goods were down $700 million, including a $400 million decrease in pharmaceuticals and an equal decrease in gem diamond exports. Capital goods exports were down $400 million, including a $600 million decrease for civilian aircraft engines. Meanwhile, vehicles and parts were down $300 million while exports of industrial supplies and materials, a category that includes oil, was up $600 million. Finally, services exports were up $300 million to $71.1 billion in October.

There are signs that ongoing trade disputes with China and others have trade activity lacking overall. Looking at 3-month averages for October, exports are down $600 million at $208 billion. Meanwhile, imports are down $2.4 billion to $258.6 billion.

Jobless Claims

When it comes to initial claims, these were down 10,000 to come in at 203,000. Meanwhile the 4-week moving average of initial claims fell 2,000 to 217,750.

Looking at continuing claims, these were up 51,000 to come in at 1.693 million. The 4-week moving average remained at 1.681 million following revisions.

Employment Situation

There were 266,000 jobs added to nonfarm payrolls in November. The unemployment rate was down 0.1% to 3.5%. Meanwhile, labor force participation was down 0.1% at 63.2%, meaning the improvement in the unemployment rate was tied to the fact that less people were looking for jobs.

Taking a look at individual industries, there were 45,000 jobs added in health care along with the same number being added in leisure and hospitality. Meanwhile, professional and technical services added 31,000 jobs in November. However, the big gainer for months was the manufacturing industry where there were 54,000 jobs added. Most of these were due to 41,000 jobs being added as General Motors workers returned from a labor strike. There were also gains in employment in the finance industry, which saw 13,000 jobs posted to payrolls and in retail, which added 2,000 jobs. There were 12,000 jobs added to government payrolls.

Not every industry saw gains. There were notable drops in mining employment, which was down 7,000 and a loss of 18,000 jobs at clothing stores.

In terms of wages, hourly earnings on private nonfarm payrolls were up $0.07 per hour to $28.29. This is an increase of 3.1% over the last 12 months. The average pay rate for production and nonsupervisory workers in the private sector was up by the same amount to come in at $23.83. The length of the average workweek for all employees remained unchanged at 34 hours, 24 minutes.

Finally, there were upward revisions for September and October numbers totaling 41,000 jobs added.

Consumer Sentiment

In preliminary ratings for December, consumer sentiment was up 2.4 points to come in at 99.2 overall., up 2.5% from the same time last month and 0.9% on the year.

Most of the gains came from increases in consumers’ assessments of the current situation, which was up 3.6 points and 3.2% at 115.2. Upper income households reported that they saw gains in household wealth that were near record levels. Much of this had to do with increased stock prices, but also inflation expectations being at an all-time low. Indeed, Americans expect prices to rise just 2.4% over the next year and 2.3% over the next 5 years.

In terms of expectations for the future, this was up 1.6 points to 88.9% on the month. Despite this, there’s wide disagreement between Democrats and Republicans, with a 41.6% gap separating the two in terms of the direction things are headed. Republicans see things going much more favorably with the economy than Democrats at this point. Independents are very close to the sentiments of the overall index.

Mortgage Rates

Mortgage rates were flat to slightly down last week. The average interest rate for a couple of key fixed-rate mortgage options remains more than a full point below where it was at this time a year ago. That means if you’re in the market, it’s a great time to consider locking your mortgage rate.

The average rate on a 30-year fixed mortgage was flat at 3.68% with 0.5 points paid in fees last week. This was down from 4.75% at the same time a year ago.

Looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.4 points paid was down a single basis point to 3.14%, which has fallen from 4.21% last year.

Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage was down four basis points to 3.39% with 0.4 points paid. This has fallen from 4.07% last year.

Stock Market

The jobs report was particularly strong, with unemployment hitting its lowest level since 1969. This caused a surge of optimism which pushed companies like Apple and Google’s parent company, Alphabet, to all-time highs. Goldman Sachs was also up 3.4%, despite an uneven week of trading in the market as a whole.

The Dow Jones Industrial Average ended up just 0.13% in the red for the week after rising 337.27 points Friday to close at 28,015.06. Meanwhile, the S&P 500 was up 28.48 points Friday, finishing at 3,145.91, up 0.16% over the course of the week. Finally, the Nasdaq closed at 8,656.53, up 85.83 points on the day and down 0.1% for the week.

The Week Ahead

Wednesday, December 11

MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.

Consumer Price Index (CPI) (8:30 a.m. ET) – The consumer price index measures changes based on the price of a fixed basket of goods and services purchased by consumers.

Federal Open Market Committee (FOMC) Meeting Announcement (2:00 p.m. ET) – The FOMC sets short-term overnight borrowing rates for banks as part of their mandate to maintain full employment while also keeping inflation at bay. These short-term rates then influence rates for everything from credit cards to longer-term rates like those for like car and mortgage loans.

Thursday, December 12

Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The 4-week moving average of new claims smooths out weekly volatility.

Producer Price Index (PPI) (8:30 a.m. ET) – The Producer Price Index measures the average change over time in prices received by domestic producers for the sale of goods and services.

Friday, December 13

Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.

It’s another fairly light week in terms of the volume of economic reports, but what we do get is important including a couple of inflation reports sandwiched around a Federal Reserve decision on short-term interest rates. The Fed has signaled that things will be status quo for a while, but the markets will be looking for any forward guidance to help them glean where things might be headed in the future.

While this certainly isn’t the most interesting article of the week if you’re not into mortgage rates and economic data, we’ve got plenty of home, money and lifestyle content to share with you if you subscribe to our email list below. It’s getting to be that festive season. Here’s an article on this year’s hottest holiday decor trends.

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