Friday Rally Following Jobs Reports Lifts Stocks Higher for Week
- November Jobs Reports Better Than Expected
- Still No Tax Bill
- Both the S&P 500 and Dow Were Up 0.4% This Week
The November jobs report came in stronger than expected. The Bureau of Labor Statistics announced this morning the US economy added 228k net new jobs in the month. The unemployment remained at 4.1%. The last two months have been a nice divergence from the rest of 2017, with an average of 236k jobs created during October and November. For the year, we are averaging 174k new jobs per month. Monthly job creation in the current expansion peaked in 2014 at 249k, but has dropped each year since then. Wages grew at a 2.5% annualized rate in the month. This is slightly higher than we saw for much of last 5-6 years, but still below what one would expect given the low unemployment rate. I believe wages remained constrained because there is a lot of slack in the labor market. People sitting on the sidelines, not counted in the formula for unemployed people, that keep coming back into the labor force as new jobs are added. This is a lot of ‘shadow’ supply of labor that is balancing out continued higher demand, thus wage growth remains relatively stagnant. Read More
Negotiations for the tax bill continued this week, but no resolution has been found. Major differences continue to exist on state and local income tax deductions, the Alternative Minimum Tax and various other issues. Additionally, the need to avoid a partial government shutdown is taking center stage with Trump negotiating with Congress on a stop-gap continuing resolution. For some reason, Trump signed a continuing resolution to fund the government through Dec 22nd. Yes, that’s just two weeks from today. It makes no sense to me why they couldn’t fund this at least through mid-January. It remains to be seen what comes of the tax reform bill, but negotiations will continue next week.
Oil declined this week, decreasing 1.6% to close at $57.36/barrel. The yield on the 10-yr Treasury ticked higher, up to 2.38% from 2.37% last week. The average rate on a 30-yr fixed rate mortgage increased to 3.94% from 3.90% a week ago.