Looking Behind and Looking Ahead

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Dwight Johnston, Vice President and Chief Economist for the California and Nevada Credit Union Leagues.

In this article we’ll recap the events and news over the past month that mattered most to the economy and markets, your credit union, and your members. Then we’ll look ahead at the key upcoming events you need to know.

Behind us—The economic news the past month was mixed but still on the strong side. But the turmoil in the stock market washed away any interest in the economy. After a rough few weeks starting in early October, stocks recovered with the aid of a more dovish tone on monetary policy by Jerome Powell. But concerns about the impact of the trade war sent stocks into a tailspin. Relief that the U.S. and China had reached agreement for a 90-day truce soon gave way to concerns that anything was accomplished, and the two sides remain far apart. The stock market tumble sent yields tumbling. 

  • Nonfarm Payrolls increased by 155k, below expectations but still a good number. The 12-month average monthly gain is 206,000
  • The Unemployment Rate remained at 3.7%.  
  • Hourly wages rose by .2% on the month, and the year-over-year rate was unchanged at 3.1%.
  • Consumer Confidence remained near a 17-year high, and Retail Sales posted a solid gain, though lower than the rate seen a few months ago.  
  • Auto sales were good and appear to be on a path to register 17 million units this year.   
  • All measures of housing slipped again. At least for the time being, buyers have cooled their quest to buy a new home.

Ahead for you—The economic data ahead should continue to be positive, but a fed funds increase at the December meeting is no longer a slam-dunk. While Fed officials say the stock market is not a factor in policy decisions, it certainly will be if the stock market remains under pressure.      

  • Dec. 12—CPI—Core CPI has cooled and there are few signs of acceleration, but this next report will still be important. The bond market will be sensitive to any reversal of the cooling.
  • Dec. 14—Retail Sales—Sales for November are expected to be very strong as the Christmas shopping season began early this year.
  • Dec. 20—Existing Home Sales—This report is not usually a market mover, but with the recent weakening trend in home sales it will be.
  • Dec. 19—FOMC meeting—While odds still favor the FOMC to raise rates, the odds have been greatly reduced from a month ago. More important to the market will be the guidance about Fed actions in 2019.
  • Anytime—More trade news, more stock market moves.

Bottom line—The bottom line has not changed this month. The economy is firing away on all cylinders, but there is skepticism mostly due to worries about trade.

Article by Dwight Johnston, Vice President and Chief Economist for the California and Nevada Credit Union Leagues.

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