What I’m Watching This Week – 18 January 2022

The Markets (as of market close January 14, 2022)

Equities closed generally lower last week, with only the Global Dow ending the week in the black. Inflation, or more likely the Federal Reserve’s response to rising prices, may have influenced investors. Markets are still adjusting to the anticipated tighter monetary policy from the Fed, which is planning on raising interest rates several times this year. The central bank is also considering reducing the size of its balance sheet, which means less demand for bonds. Ten-year Treasury yields ended the week flat. The dollar dipped lower, while crude oil prices rose nearly 7.0%, reaching $84.23 per barrel. Gold advanced, but remains marginally below its 2021 year-end price.

Stocks continued their slide last Monday, despite a marginal surge in tech shares. Several of the major indexes declined, with the Dow (-0.5%), the S&P 500 (-0.1%), the Russell 2000 (-0.4%), and the Global Dow (-0.2%) ending the day in the red. Only the Nasdaq was able to close ahead, but only by 0.1%. The Federal Reserve’s monetary policy in response to rising inflation continued to dominate the market. Ten-year Treasury yields climbed higher as bond prices fell. Crude oil prices dropped to $78.43 per barrel. The dollar rose against a basket of currencies. Health care, communication services, and information technology were the only market sectors to advance.

Last Tuesday saw stocks rebound after Federal Reserve Chair Jerome Powell stated that the Fed would do whatever is needed to control rising inflation. Tech stocks followed Monday’s increase with another strong performance, sending the Nasdaq up 1.4% on the day. The Russell 2000 jumped 1.1%, followed by the S&P 500 and the Global Dow (0.9%), and the Dow (0.5%). The dollar and 10-year Treasury yields fell, while crude oil prices rose to $81.42 per barrel. Energy, materials, communication services, and information technology led the market sectors.

Stocks closed last Wednesday generally higher, despite rising inflation. The benchmark indexes listed here posted gains, with the S&P 500 (0.3%) and the Nasdaq (0.2%) finishing ahead of the Dow (0.1%). Only the Russell 2000 failed to add value, closing down 0.5%. The Consumer Price Index rose 0.5% in December, ending 2021 with its largest annual increase in nearly 40 years, increasing the likelihood that the Federal Reserve will move to quell inflationary pressures. Ten-year Treasury yields dipped lower, as did the dollar. Crude oil prices rose to $82.70 per barrel.

The Nasdaq dropped 2.5% last Thursday amid tech stock losses. With the growing likelihood that interest rates will be rising soon, investors may be moving from growth shares to value stocks. Also last Thursday, investors saw an increase in weekly unemployment claims and wholesale price inflation. The S&P 500 fell 1.4%, the Russell 2000 dipped 0.8%, and the Dow slipped 0.5%. The Global Dow inched up 0.1%. Ten-year Treasury yields, the dollar, and crude oil prices slid lower. Consumer discretionary and information technology declined more than 2.0%.

Stocks were mixed last Friday, with the Nasdaq (0.6%), the Russell 2000 (0.1%), and the S&P 500 (0.1%) ending the day higher, while the Dow (-0.6%) and the Global Dow (-0.2%) closed lower. Crude oil prices, the dollar, and 10-year Treasuries climbed higher on the day. Fourth-quarter earnings reports from a few major banks were released last week, with mixed results. A slew of banks and financial companies will be reporting their fourth-quarter earnings data this week.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 1/14Weekly ChangeYTD Change
DJIA36,338.3036,231.6635,911.81-0.88%-1.17%
Nasdaq15,644.9714,935.9014,893.75-0.28%-4.80%
S&P 5004,766.184,677.034,662.85-0.30%-2.17%
Russell 20002,245.312,179.812,162.46-0.80%-3.69%
Global Dow4,137.634,232.874,293.851.44%3.78%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries1.51%1.77%1.77%0 bps26 bps
US Dollar-DXY95.6495.7595.17-0.61%-0.49%
Crude Oil-CL=F$75.44$78.95$84.236.69%11.65%
Gold-GC=F$1,830.30$1,795.30$1,816.501.18%-0.75%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Inflationary pressures continued to increase in December. According to the latest data, the Consumer Price Index rose 0.5% last month after increasing 0.8% in November. The CPI advanced 7.0% in 2021, the highest annual increase since 1982. Food prices rose 0.5% in December (6.3% for the year). Energy prices dipped 0.4% last month, but increased 29.3% in 2021, led by a 49.6% rise in gasoline prices. December saw prices increase for new vehicles (1.0%) and used cars and trucks (3.5%). For 2021, automobile prices rose markedly, with new vehicle prices advancing 11.8%, while prices for used cars and trucks climbed 37.3%. A rise in prices for apparel (1.7%) and shelter (0.4%) also contributed to the increase in the December CPI.
  • The Producer Price Index increased 0.2% in December after climbing 1.0% in November. The PPI moved up 9.7% in 2021, the largest calendar-year increase since data was first collected in 2010. A 0.5% increase in prices for services drove the overall December increase, as prices for goods decreased 0.4%. Over half of the December advance in prices for services is attributable to margins for final demand trade services, which moved up 0.8%. (Trade indexes measure changes in margins received by wholesalers and retailers.) Leading the December decline in goods prices was a decrease in energy prices, which fell 3.3%. Prices for foods fell 0.6% in December.
  • Retail sales fell 1.9% in December after advancing 0.2% in November. Nevertheless, retail sales rose 19.3% in 2021. Weakness in sales was broad-based in December, with only a few exceptions. Last month saw clothing and clothing accessories stores sales dip 3.1%, motor vehicle and parts dealers sales fall 0.4%, and nonstore (online) sales drop 8.7%. Many factors may have contributed to the decrease in December sales, including lack of inventory and reluctance to spend on big-ticket items that were not discounted; some shoppers may have started their buying earlier than usual. While December sales may have dropped off, most businesses saw sales increase in 2021 compared to the previous year’s totals. Sales for motor vehicle and parts dealers rose 23.6%, furniture and home furnishings sales increased 26.4%, electronics and appliance stores sales rose 25.2%, clothing and clothing accessories stores sales jumped 48.4%, and gasoline stations sales advanced 36.6%.
  • Both import and export prices surprisingly declined in December. Import prices fell 0.2% after advancing 0.7% in November, as lower fuel prices more than offset higher nonfuel imports. Despite the December drop, import prices increased 10.4% for 2021, the largest calendar-year rise since import prices increased 10.6% in 2007. Export prices dropped 1.8% last month after increasing 1.0% in November. The December decline in export prices was the largest one-month drop since a 3.5% price decline in April 2020. Export prices rose 14.7% from December 2020 to December 2021, marking the largest calendar-year increase since data was first published in 1984.
  • Industrial production declined 0.1% in December. Losses of 0.3% for manufacturing (+3.5% for 2021) and 1.5% for utilities were mostly offset by a gain of 2.0% for mining. For the fourth quarter as a whole, total industrial production rose at an annual rate of 4.0%. Total industrial production in December was 3.7% higher than it was at the end of 2020 and 0.6% above its pre-pandemic (February 2020) reading.
  • The federal budget deficit was $21.3 billion for December. Government receipts were $486.7 billion, while outlays totaled $508.0 billion. The total government deficit through the first three months of fiscal year 2022 is $377.7 billion, $195.2 billion lower than the deficit over the same period in fiscal year 2021.
  • The national average retail price for regular gasoline was $3.295 per gallon on January 10, $0.014 per gallon more than the prior week’s price and $0.978 higher than a year ago. Gasoline production increased during the week ended January 7, averaging 8.6 million barrels per day. U.S. crude oil refinery inputs averaged 15.6 million barrels per day during the week ended January 7 — 293,000 barrels per day less than the previous week’s average. Refineries operated at 88.4% of their operable capacity.
  • For the week ended January 8, there were 230,000 new claims for unemployment insurance, an increase of 23,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended January 1 was 1.1%, a decrease of 0.2 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended January 1 was 1,559,000, a decrease of 194,000 from the prior week’s level, which was revised down by 1,000. This is the lowest level for insured unemployment since June 2, 1973, when it was 1,556,000. States and territories with the highest insured unemployment rates for the week ended December 25, 2021, were Alaska (3.2%), Minnesota (2.6%), California (2.5%), New Jersey (2.4%), Illinois (2.3%), New York (2.3%), Massachusetts (2.1%), Rhode Island (2.1%), Connecticut (2.0%), and Oregon (1.9%). The largest increases in initial claims for the week ended January 1 were in New York (+8,812), Pennsylvania (+6,772), Connecticut (+6,020), Washington (+4,626), and Michigan (+3,923), while the largest decreases were in Missouri (-1,086), Tennessee (-674), Puerto Rico (-329), Rhode Island (-288), and New Mexico (-101).

Eye on the Week Ahead

This week’s economic news focuses on the housing sector, with the December data on housing starts and existing home sales. The number of building permits rose 3.6% in November, while housing starts jumped 11.8% — both signs that new home construction is on the upswing. Sales of existing homes have also been on the rise since September 2021. November saw existing home sales increase 1.9%, another indication that the demand for housing is solid.

What I’m Watching This Week – 10 January 2022

The Markets (as of market close January 7, 2022)

After beginning the week on a high note, stocks couldn’t maintain that momentum, ending the week in the red. Following a record close on Monday, the S&P 500 ended the week down 1.9%, the worst start to a year since 2016. Some investors may be concerned that the Federal Reserve will raise interest rates faster than had been anticipated. The Nasdaq fell 4.5%, its worst week since February 2021. Treasury yields continued to mount in anticipation of higher interest rates. While the December employment report showed a slightly underwhelming 199,000 new jobs added, the unemployment rate fell to a pandemic-era low of 3.9%, possibly adding further fodder for the Fed to continue its hawkish bent.

Wall Street kicked off the start of 2022 in fine fashion, recording record highs last Monday. The Nasdaq and the Russell 2000 climbed 1.2%. The large caps of the Dow (0.7%) and the S&P 500 (0.6%) advanced, while the Global Dow added 0.6%. Bond prices dipped, possibly in anticipation of rising interest rates, sending 10-year Treasury yields up to 1.62%. Crude oil prices rose $76.07 per barrel, while the dollar gained 0.7%. Energy (3.1%) and consumer discretionary (2.8%) led the market sectors, while materials, real estate, and health care fell. The risk rally sent gold prices down nearly 1.5% to $1,801.90 per ounce.

Stocks were mixed last Tuesday, with the Dow reaching its second record high in 2022, while a tech rout pulled the Nasdaq down 1.3%. The Russell 2000 and the Global Dow each gained more than 1.0% on the day, while the S&P 500 was little changed. Ten-year Treasury yields jumped to 1.66%, crude oil prices rose for the second consecutive day to close at $77.00 per barrel, while the dollar stalemated. Energy, financials, and industrials climbed higher, while information technology and health care trended lower.

Equities fell last Wednesday following the release of the minutes from the Federal Reserve meeting, raising the prospect for multiple interest-rate hikes beginning in the near term. The Nasdaq and the Russell 2000 each dropped 3.3%. The S&P 500 fell 1.9%. The Dow dipped 1.1%. Ten-year Treasury yields continued to rise, closing at 1.7% as bond prices fell. Crude oil prices rose marginally to close at $77.19 per barrel. The dollar was little changed. Each of the market sectors lost value, with the biggest declines hitting information technology, real estate, communication services, and consumer discretionary.

Stocks continued to trend lower last Thursday, with only the Russell 2000 advancing by the close of trading. The Dow fell 0.5% and the Global Dow dipped 0.4%. The Nasdaq and the S&P 500 were flat. Ten-year Treasury yields rose again, climbing to 1.73%. Crude oil prices were approaching $80.00 per barrel, while the dollar was unchanged. Energy and financials advanced, while health care and materials declined.

Equities couldn’t reverse course last Friday, closing the day in the red. The Russell 2000 fell 1.1%, followed by the Nasdaq (-1.0%), and the S&P 500 (-0.4%). The Dow was flat, while the Global Dow gained 0.7%. The dollar and crude oil prices fell, while 10-year Treasury yields continued to climb higher, jumping 3.8 basis points. Among the market sectors, energy, financials, and utilities advanced, while information technology and consumer discretionary fell more than 1.0%.

Stock Market Indexes

Market/Index2021 ClosePrior WeekAs of 1/7Weekly ChangeYTD Change
DJIA36,338.3036,338.3036,231.66-0.29%-0.29%
Nasdaq15,644.9715,644.9714,935.90-4.53%-4.53%
S&P 5004,766.184,766.184,677.03-1.87%-1.87%
Russell 20002,245.312,245.312,179.81-2.92%-2.92%
Global Dow4,137.634,137.634,232.872.30%2.30%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries1.51%1.51%1.77%26 bps26 bps
US Dollar-DXY95.6495.6495.750.12%0.12%
Crude Oil-CL=F$75.44$75.44$78.954.65%4.65%
Gold-GC=F$1,830.30$1,830.30$1,795.30-1.91%-1.91%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • December saw 199,000 new jobs added, and the unemployment rate fell 0.3 percentage point to 3.9%. The total number of unemployed persons declined by 483,000 to 6.3 million. For comparison, in February 2020, the unemployment rate was 3.5% and there were 5.7 million unemployed persons. Employment has increased by 18.8 million since April 2020 but is down by 3.6 million, or 2.3%, from its pre-pandemic level in February 2020. In December, the number of workers who permanently lost jobs dipped by 202,000 to 1.8 million. The labor force participation rate was unchanged at 61.9% in December but remains 1.5 percentage point lower than in February 2020. The employment-population ratio increased by 0.2 percentage point to 59.5% in December but is 1.7 percentage point below its February 2020 level. In December, there were 5.7 million people not in the labor force who wanted a job. This total fell by 1.6 million over the year, but is 717,000 higher than in February 2020. In December, the share of employed persons who teleworked because of the coronavirus was 11.1%, little changed from November. In December, 3.1 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. This level is down from 3.6 million in November. In December, average hourly earnings increased by $0.19 to $31.31. Over the past 12 months, average hourly earnings have increased by 4.7%. The average work week in December was unchanged at 34.7 hours.
  • According to the latest report from IHS Markit, the U.S. Purchasing Managers’ Index for December dipped to 57.7, down from 58.3 in November. Since a reading above 50 indicates growth in the manufacturing sector, survey respondents noted growth in December, but at a slower pace than in November. With the exception of October and November, the pace of output growth in December was the slowest since October 2020 as material shortages and supplier delays continued to drag production lower. On the plus side, supply-chain bottlenecks eased as did client demand.
  • The services sector enjoyed a strong December, posting an IHS Markit U.S. Services PMI Business Activity Index of 57.6. While the rise in services activity was the slowest in the past three months, the decrease was marginal and was supported by a sharp increase in new business, as the rise in new orders was the fastest in the last five months. Although firms sought to increase their workforces to tackle strong growth in backlogs of work, labor shortages and challenges retaining staff hampered progress. Meanwhile, soaring wage bills and greater supplier prices led to the steepest increase in cost burdens on record.
  • According to the latest Job Openings and Labor Turnover Summary, November saw the number and rate of job openings decrease to 10.6 million (-529,000) and 6.6%, respectively. Job openings declined in several industries, with the largest decreases in accommodation and food services (-261,000), construction (-110,000), and nondurable goods manufacturing (-66,000). Job openings increased in finance and insurance (+83,000) and in federal government (+25,000). Over the 12 months ended in November 2021, hires totaled 74.5 million and separations totaled 68.7 million, yielding a net employment gain of 5.9 million. While the number of hires was little changed in November from the previous month, the number of total separations increased by 382,000 to 6.3 million. The number of workers who quit their respective jobs increased in November to a series high of 4.5 million, while the quits rate jumped to 3.0%.
  • The latest data shows that the goods and services trade deficit for November was $80.2 billion, up $13.0 billion from October. November exports were $224.2 billion, $0.4 billion more than October exports. November imports were $304.4 billion, $13.4 billion more than October imports. Year to date, the goods and services deficit increased $174.6 billion, or 28.6%, from the same period in 2020. Exports increased $354.4 billion, or 18.2%. Imports increased $529.0 billion, or 20.7%.
  • The national average retail price for regular gasoline was $3.281 per gallon on January 3, $0.006 per gallon more than the prior week’s price and $1.032 higher than a year ago. Gasoline production decreased during the week ended December 31, averaging 8.5 million barrels per day. U.S. crude oil refinery inputs averaged 15.9 million barrels per day during the week ended December 31 — 163,000 barrels per day more than the previous week’s average. Refineries operated at 89.8% of their operable capacity.
  • Not unexpectedly, claims for unemployment insurance rose during the holiday period of Christmas through New Year’s Day. For the week ended January 1, there were 207,000 new claims for unemployment insurance, an increase of 7,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended December 25 was 1.3%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended December 25 was 1,754,000, an increase of 36,000 from the prior week’s level, which was revised up by 2,000. Unemployment insurance claims are in line with pre-pandemic totals. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates for the week ended December 18, 2021 were Alaska (3.1%), the Virgin Islands (2.6%), New Jersey (2.3%), California (2.2%), Minnesota (2.2%), Puerto Rico (2.0%), Illinois (1.9%), Massachusetts (1.9%), New York (1.8%), and Rhode Island (1.8%). The largest increases in initial claims for the week ended December 25 were in New Jersey (+4,660), Pennsylvania (+3,320), Ohio (+2,615), Michigan (+2,440), and New York (+2,287), while the largest decreases were in California (-7,320), Texas (-3,955), Virginia (-2,183), Alabama (-1,293), and Wisconsin (-1,181).

Eye on the Week Ahead

Inflation data for December is available this week with the release of the Consumer Price Index and the Producer Price Index. The CPI rose 6.8% through November, while the PPI vaulted 9.6%. Neither index is projected to decrease based on December’s figures.

Annual Market Review 2021

Overview

The year 2021 was one of extreme change. January saw the inauguration of President Joe Biden, but not before protesters sieged the United States Capitol. Despite the initial tumult, the year began with hope that increased availability of coronavirus vaccinations would lead to the end of the pandemic. Unfortunately, throughout the year, the emergence of virus mutations, coupled with the uneven distribution of vaccines, saw millions more people become ill or perish after contracting the virus.

Nevertheless, several of the worlds’ largest economies enjoyed notable recoveries. In the United States, two additional rounds of stimulus payments in the first quarter helped line consumers’ pocketbooks, which led to rapidly increasing demand for goods and services. Historically low lending rates and a rise in remote work increased the opportunity for consumers to spend.

However, the rapid economic turnaround brought with it a historic surge in consumer and producer prices, labor shortages, and global supply-chain bottlenecks. Low-interest rates and stimulus measures adopted by the Federal Reserve gave people more access to money and buying power. Personal income increased as did personal consumption expenditures. Corporate earnings were strong, despite labor and supply shortages and lingering economic uncertainty caused by the pandemic.

U.S. inflation reached a nearly 40-year high late in the year, as growing consumer demand was stunted by pandemic-related supply constraints. Historically low mortgage rates helped propel the housing market, as both the number of residential sales and property values escalated. Energy prices, particularly gas prices, rose by nearly 50%, as crude oil reached more than $80 per barrel for the first time since 2014.

An influx of day-trading investors collided with hedge-fund investors and Wall Street professionals. So-called “meme traders” manipulated stock prices from their sofas through collaborative investing on social media platforms.

Cryptocurrency also gained more mainstream acceptance and attention in 2021, with a market cap of all cryptocurrencies topping $3 trillion. The rapid growth of cryptocurrency also led to more government scrutiny. China’s central bank declared all cryptocurrency-related transactions illegal as that country was determined to crack down on the industry. U.S. economic recovery was highlighted by job growth and dwindling unemployment claims. Employment gains averaged over 550,000 per month in 2021, while weekly jobless claims fell to a 52-year low in December.

Despite increasing numbers of COVID-related cases, the stock market generally prospered, with each of the benchmark indexes posting year-over-year gains. Each of the market sectors also ended 2021 in the black. Overall, we experienced plenty of change in 2021. The year 2022 is likely to be very interesting as well.

Market/Index2020 CloseAs of 9/302021 CloseMonth ChangeQ4 Change2021 Change
DJIA30,606.4833,843.9236,338.305.38%7.37%18.73%
Nasdaq12,888.2814,448.5815,644.970.69%8.28%21.39%
S&P 5003,756.074,307.544,766.184.36%10.65%26.89%
Russell 20001,974.862,204.372,245.312.11%1.86%13.69%
Global Dow3,487.523,958.344,137.635.74%4.53%18.64%
Fed. Funds0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps0 bps
10-year Treasuries0.91%1.52%1.51%7 bps-1 bps60 bps
US Dollar-DXY89.8494.2595.64-0.27%1.47%6.46%
Crude Oil-CL=F$48.52$75.03$75.4412.65%0.55%55.48%
Gold-GC=F$1,893.10$1,758.20$1,830.303.34%4.10%-3.32%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Snapshot 2021

The Markets

  • Equities: Throughout the year, the U.S. stock market pushed higher. Despite mounting COVID cases, escalating inflation, labor shortages, supply bottlenecks, and severe weather that hit nearly every part of the country at one time or another, Wall Street continued to post gains. Large caps, small caps, growth, value — seemingly every market segment increased, surpassing most of the outlooks at the start of the year. While many factors contributed to the strong market performance in 2021, a few highlights include consistently favorable data pointing to ongoing economic recovery, strong corporate earnings throughout 2021, the acceptance of cryptocurrency as a mainstream investment, a low interest-rate environment, stimulus programs that provided consumers with cash, increasing job opportunities, and the availability of coronavirus vaccines.
  • On the last day of the year, the S&P 500 eclipsed its 2020 closing by nearly 27.0%, the Nasdaq rose by more than 21.3%, the Dow gained about 19.0%, the Global Dow advanced 18.6%, and the Russell 2000 climbed 13.7%. The fourth quarter was particularly robust for large caps, with the S&P 500 climbing 10.7% and the Dow advancing 7.4%. Each of the market sectors closed the year well above its prior year’s totals. Energy ended 2021 48.0% higher, followed by real estate (43.0%), information technology (33.5%), and financials (33.0%).
  • Bonds: For the most part, long-term bonds underperformed, particularly on inflation concerns, low interest rates, economic growth, and favorable stock performance. Ten-year Treasuries ended the year at 1.51%, up 60 basis points, the biggest annual rise since 2013. U.S. bond returns were down about 3.0%, well below other major bond markets. With the Federal Reserve likely to accelerate interest rates in 2022, 10-year Treasury yields are expected to push above 2.0% next year.
  • Oil: Crude oil prices fell in 2020 as demand dwindled due to coronavirus constraints. However, crude oil prices surged in 2021 as economic growth quickly increased demand and the time needed to accelerate output to pre-pandemic levels. Crude oil prices opened the year around $48.50 per barrel but rose steadily for most of the year, reaching more than $80.00 per barrel in October — a price not seen since 2014 — ultimately ending 2021 at about $75.44 per barrel.
  • Prices at the pump also vaulted higher in 2021. The national average retail price for regular gasoline was $2.249 per gallon to begin 2021. Gas prices steadily increased throughout the year, reaching a high of $3.410 in early November. Gas prices trended marginally lower for the remainder of 2021, closing out the year at $3.275 per gallon on December 27.
  • FOMC/interest rates: The Federal Reserve began the year focused on promoting economic recovery. The Fed maintained the target range for the federal funds rate at 0.00%-0.25% for the duration of 2021, while continuing to purchase securities on a monthly basis ($80 billion Treasuries and $40 billion mortgage-backed securities) through November. For much of the year, employment gains were solid, consumer demand for goods and services increased, and overall economic activity strengthened. However, strong consumer demand collided with pandemic-related supply constraints, driving prices higher, such that inflation hit a nearly 39-year high in November, with prices up 6.8% (Consumer Price Index) from a year before. The Fed initially termed the rapid rise in prices “transitory,” expecting that the factors driving inflation upward would subside. However, by November, the Fed acknowledged that factors contributing to inflationary pressures were more than “transitory” and agreed to begin tapering its asset purchases in December. The Fed also projected that it would increase interest rates as many as three times in 2022.
  • US Dollar-DXY: The dollar held its own for much of the year, reaching a new high in November. Despite a marginal dip at the end of the year, the dollar is still on track to enjoy its biggest gain since 2015. With the prospects of the Federal Reserve raising interest rates, the dollar could see another surge in 2022. The US Dollar Index (DX-Y.NYB), which measures the U.S. dollar against the currencies of several other countries, hit a high of $96.94 in November and hovered between $92.60 and $96.00 since early July. It closed at $95.64 on December 31, rising nearly 6.5% since the beginning of the year.
  • Gold: Gold prices began the year at $1,893.10 and closed 2021 at $1,830.30, a decrease of nearly 3.3%. During the year, gold fell to $1,700.20 at the end of February, only to surge to $1,895.70 in mid-May. Generally, stock market growth, rising bond yields, and a stronger dollar kept gold prices in check for most of 2021.

Last Month’s Economic News

  • Employment: Job growth slowed in November with the addition of 210,000 new jobs, well below the 2021 monthly average of 555,000. The unemployment rate fell by 0.4 percentage point to 4.2%. The number of unemployed persons fell by 542,000 to 6.9 million. For comparison, in November 2020 the unemployment rate was 6.7% and the number of unemployed persons was 10.7 million. While both measures are down considerably from their highs at the end of the February-April 2020 recession, they remain above their levels prior to the coronavirus pandemic (3.5% and 5.7 million, respectively, in February 2020). Among the unemployed, the number of workers who permanently lost their jobs declined by 205,000 to 1.9 million in November, although this is 623,000 higher than in February 2020. The labor force participation rate edged up to 61.8% in November and is 1.5 percentage point lower than in February 2020. The employment-population ratio increased by 0.4 percentage point to 59.2% in November but remained below the pre-pandemic figure of 61.1% in February 2020. In November, average hourly earnings increased by $0.08 to $31.03. Over the past 12 months ended in November, average hourly earnings rose by 4.8% (average hourly earnings in November 2020 were $29.61). The average work week increased by 0.1 hour to 34.8 hours in November (unchanged from November 2020).
  • There were 965,000 Initial claims for unemployment insurance for the week ended January 9, 2021. During the same period, the total number of workers receiving unemployment insurance was 5,271,000. Over the course of the year, initial weekly claims steadily decreased on a monthly basis thereafter, hitting a low of 188,000 in early December. As of December 25, there were 198,000 initial claims for unemployment insurance and the total number of claims paid for the week ended December 18 was 1,716,000, which is below the February 2020 (pre-pandemic) figure of 1,724,000.
  • FOMC/interest rates: The Federal Open Market Committee met in December and agreed to cut its asset purchase program by $30 billion per month beginning in January 2022, with the option of making similar reductions in the pace of asset purchases each month thereafter, unless the Committee determines an adjustment is warranted. The Committee decided to keep the target range for the federal funds rate at 0.00%-0.25%. The FOMC acknowledged that inflation is broad-based and attributed it to “supply and demand imbalances related to the pandemic and the reopening of the economy.”
  • GDP/budget: While the economy accelerated in the third quarter, it did not keep pace with the rate of growth in the second quarter. Gross domestic product increased at an annualized rate of 2.3% in the third quarter. GDP rose 6.7% in the second quarter. The increase in third-quarter GDP reflected the continued economic impact of the COVID-19 pandemic. A resurgence of COVID-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country. Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased. Consumer spending, as measured by the personal consumption expenditures index, rose 2.3% in the third quarter, well below the pace set in the second quarter (6.7%) and the first quarter (6.3%). Nonresidential (business) fixed investment rose 1.7% in the third quarter compared to a 9.2% jump in the second quarter. Exports fell 5.3% in the third quarter, compared with a 7.6% increase in the previous quarter. Imports, which are a negative in the calculation of GDP, rose 4.7% in the third quarter, down from a 7.1% increase in the second quarter. Consumer prices increased 5.3% in the third quarter (6.5% in the second quarter). Excluding food and energy, consumer prices advanced 4.6% in the third quarter (6.1% in the second quarter).
  • November saw the federal budget deficit come in at $191.3 billion, down roughly 32.0% from November 2020. The deficit for the first two months of fiscal year 2022, at $356.4 billion, is 20.5% lower than the first two months of the previous fiscal year. Through November, government outlays rose 4.0%, while receipts increased 21.6%. Through the first two months of fiscal year 2022 compared to the same period last year, individual income taxes are up $79.6 billion ($282.1 billion versus $202.5 billion), while corporate income taxes have risen $9.4 billion ($15.4 billion versus $6.0 billion).
  • Inflation/consumer spending: According to the latest Personal Income and Outlays report, personal income and disposable personal income rose 0.4% in November after increasing 0.5% and 0.4%, respectively, in October. Consumer spending advanced 0.4% in November after increasing 1.4% the previous month. Consumer prices climbed 0.6% in November after increasing 0.7% in October. Consumer prices have risen 5.7% since November 2020.
  • The Consumer Price Index climbed 0.8% in November after advancing 0.9% in October. Over the 12 months ended in November, the CPI rose 6.8% — the largest 12-month gain since June 1982. Price growth was broad based, with all major categories showing an increase, led by gasoline (6.1%), energy commodities (5.9%), fuel oil (3.5%), and used cars and trucks (2.5%). Prices for food rose 0.7%, while prices for food at home increased 0.8%. Since November 2020, gasoline prices are up 58.1%, fuel oil has increased 59.3%, food prices have risen 6.1% (food at home has climbed 6.4%), while new vehicles (11.1%) and used vehicles (31.4%) also advanced.
  • Prices that producers receive for goods and services rose 0.8% in November following a 0.6% October jump. Producer prices increased 9.6% for the 12 months ended in November, the largest advance since data was first calculated in November 2010. Producer prices less foods, energy, and trade services rose 0.7% in November, which is the largest monthly increase since July 2021. In November, prices for services increased 0.7%, while prices for goods climbed 1.2%. For the 12 months ended in November, prices less foods, energy, and trade services moved up 6.9%, the largest rise since 12-month data was first calculated in August 2014.
  • Housing: Sales of existing homes increased 1.9% in November, marking the third consecutive monthly increase. Existing home sales dropped 2.0% from November 2020. The median existing-home price was $353,900 in November, the same price as in October. Unsold inventory of existing homes represents a 2.1-month supply at the current sales pace, a decline from both the prior month and from one year ago. Sales of existing single-family homes rose 1.6% in November following a 1.3% jump in October. Over the last 12 months, sales of existing single-family homes are down 2.2%. The median existing single-family home price was $362,600 in November, up from $360,800 in October.
  • New single-family home sales also advanced in November, climbing 12.4% after falling 9.2% (revised) in October. The median sales price of new single-family houses sold in November was $416,900 ($408,700 in October). The November average sales price was $481,700 ($478,200 in October). The inventory of new single-family homes for sale in November represented a supply of 6.5 months at the current sales pace, down from the October estimate of 7.1 months.
  • Manufacturing: Industrial production rose 0.5% in November, advancing 5.3% since November 2020. Manufacturing increased 0.7% in November, reaching its highest level since January 2019. Over the past 12 months, manufacturing has increased 4.6%. Mining rose 0.7% in November, while utilities decreased 0.8%. Several market groups advanced in November. Over the 12 months ended in November, motor vehicles and parts fell 5.4%, while most of the other industry groups advanced, with notable gains in machinery, petroleum and coal products, electric, and natural gas. Capacity utilization reached 76.8% in November, its highest level since 76.8% in November 2019.
  • November saw new orders for durable goods increase 2.5%, advancing for six out of the last seven months. Durable goods orders inched up 0.1% in October. New orders for durable goods rose 21.5% since November 2020. Excluding transportation, new orders increased 0.8% in November. Excluding defense, new orders increased 2.0%. Transportation equipment, up following two consecutive monthly decreases, led the November increase, up 6.5%.
  • Imports and exports: Both import and export prices rose higher in November. Import prices rose 0.7% after increasing 1.5% in the prior month. Prices for imports have risen each month of 2021, except for a 0.2% decline in August. Since November 2020, import prices have advanced 11.7%, the largest 12-month increase since prices climbed 12.7% for the period ended in September 2011. Import fuel prices continued to increase, rising 2.0% in November. Import fuel prices have advanced 86.1% since November 2020. Excluding fuel prices, import prices rose 0.5% in November and are up 1.6% for the last 12 months. Export prices increased 1.0% in November after rising 1.6% in October. Export prices increased 18.2% over the 12 months ended in November, the largest 12-month advance since data was first published in September 1984.
  • The international trade in goods deficit was $97.8 billion in November, up $14.6 billion, or 17.5%, from October. Exports of goods were $154.7 billion in November, $3.3 billion less than in October. Imports of goods were $252.4 billion in November, $11.3 billion more than in October. The November drop in exports was widespread, with only foods, feeds, and beverages increasing. On the other hand, each category of imports rose, led by industrial supplies, consumer goods, and automotive vehicles.
  • The latest information on international trade in goods and services, out December 7, is for October and shows that the goods and services trade deficit was $161.1 billion, a decrease of $14.3 billion, or 17.6%, from the September deficit. October exports were $223.6 billion, 8.1%, more than September exports. October imports were $290.7 billion, 0.9%, more than September imports. Year to date, the goods and services deficit increased $161.1 billion, or 29.7%, from the same period in 2020. Exports increased $315.1 billion, or 17.9%. Imports increased $476.8 billion, or 20.7%.
  • International markets: Despite several countries reporting record numbers of COVID-19 cases, global economic recovery has been fairly steady, as several nations around the world held off from imposing fresh lockdowns. Gross domestic product rose in several countries including the United Kingdom (6.9%), the Eurozone (5.2%), Germany (2.9%), Japan (1.6%), and China (7.7%). Crude oil prices dipped below $80.00 per barrel following their biggest rise since 2009. And stock markets were poised to close the year well above where they started in 2021. For 2021, the STOXX Europe 600 Index rose 22.3%; the United Kingdom’s FTSE advanced 14.3%; Japan’s Nikkei 225 Index climbed 4.9%; and China’s Shanghai Composite Index gained 4.8%.
  • Consumer confidence: The Conference Board Consumer Confidence Index® increased in December. The index stands at 115.8, up from 111.9 in November (revised). The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, was relatively flat at 144.1 in December, down from 144.4 the previous month. The Expectations Index — based on consumers’ short-term outlook for income, business, and labor market conditions — increased to 96.9 in December, up from November’s reading of 90.2.

Eye on the Year Ahead

The year 2022 should bring continued economic recovery. As the United States and the world inch slowly toward normalcy following the battle against the COVID-19 pandemic, stock markets, employment, and production should also advance. Inflationary pressures are likely to continue, which will most certainly prompt adjustments to the target range for the federal funds rate. Will President Joe Biden and lawmakers be able to reach an accord on a spending bill? Will the coronavirus continue to mutate and spread? The year 2022 is likely to provide another roller-coaster ride.

What I’m Watching This Week – 3 January 2022

The Markets (as of market close December 31, 2021)

The last week of 2021 saw stocks close generally higher, with only the Nasdaq slipping lower. The Dow ended the week up 1.1%, followed by the S&P 500, the Global Dow, and the Russell 2000. The week between Christmas and New Year’s Day is generally marked by thin trading, and last week was no exception. Most of the market sectors closed the week in the black, led by real estate, utilities, materials, and consumer staples. Ten-year Treasury yields inched higher, crude oil prices rose $1.66 per barrel, while the dollar dipped lower.

Wall Street closed higher for a fourth day last Monday as investors weighed the prospects of a year-end rally against rising COVID cases. The S&P 500 gained 1.4% to mark its 69th record close of 2021. The Nasdaq also rose 1.4% as tech stocks continued to advance higher. The Dow rose 1.0%, the Russell 2000 climbed 0.9%, and the Global Dow added 0.6%. Ten-year Treasury yields slid, while crude oil prices and the dollar advanced. All of the market sectors moved higher, led by energy, real estate, and information technology.

Stocks ended last Tuesday mixed, with only the Global Dow and the Dow gaining 0.3% by the close of trading. The Russell 2000 fell 0.7%, the Nasdaq dropped 0.6%, and the S&P 500 slipped 0.1%. Crude oil prices and the dollar advanced marginally, while 10-year Treasury yields were unchanged at 1.48%. Utilities and consumer staples led the market sectors, while information technology and communication services declined.

The Dow and the S&P 500 each climbed to record highs last Wednesday, while tech shares dragged the Nasdaq marginally lower. Wednesday’s record close for the S&P 500 was the 70th of the year for that index. In what was a day of low trading volume, the Russell 2000 and the Global Dow also posted minimal gains. Bond prices dipped, sending yields higher, with 10-year Treasuries jumping 4.2%. Crude oil prices rose to $76.50 per barrel, while the U.S. Dollar Index slipped to 95.91.

Wall Street’s winning streak ended last Thursday, as each of the benchmark indexes closed in the red. The S&P 500 and the Dow lost 0.3%. The Nasdaq and the Global Dow fell 0.2%, while the Russell 2000 was unchanged. Crude oil prices and 10-year Treasuries slipped, while the dollar inched higher. Among the market sectors, only utilities, real estate, health care, and communication services closed higher. Energy and information technology fell 0.7%. Stocks closed the week and the year with mixed returns. The Dow, the S&P 500, and the Nasdaq, fell last Friday, while the Russell 2000 and the Global Dow inched higher. The market sectors were also mixed last Friday, with consumer staples, energy, industrials, materials, real estate, and utilities posting gains, while the remaining sectors slid. Ten-year Treasury yields, crude oil prices, and the dollar dipped lower.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 12/31Weekly ChangeYTD Change
DJIA30,606.4835,950.5636,338.301.08%18.73%
Nasdaq12,888.2815,653.3715,644.97-0.05%21.39%
S&P 5003,756.074,725.794,766.180.85%26.89%
Russell 20001,974.862,241.582,245.310.17%13.69%
Global Dow3,487.524,109.074,137.630.70%18.64%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.49%1.51%2 bps60 bps
US Dollar-DXY89.8496.0695.64-0.44%6.46%
Crude Oil-CL=F$48.52$73.78$75.442.25%55.48%
Gold-GC=F$1,893.10$1,810.00$1,830.301.12%-3.32%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • The international trade in goods deficit expanded by $14.6 billion, or 17.5%, in November. Exports of goods for November were $154.7 billion, $3.3 billion less than October exports. Imports of goods for November were $252.4 billion, $11.3 billion more than October imports.
  • The national average retail price for regular gasoline was $3.275 per gallon on December 27, $0.020 per gallon less than the prior week’s price but $1.032 higher than a year ago. Gasoline production increased during the week ended December 24, averaging 10.1 million barrels per day. U.S. crude oil refinery inputs averaged 15.7 million barrels per day during the week ended December 24 — 124,000 barrels per day less than the previous week’s average. Refineries operated at 89.7% of their operable capacity, 0.1 percentage point below the prior week’s rate of capacity.
  • For the week ended December 25, there were 198,000 new claims for unemployment insurance, a decrease of 8,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended December 18 was 1.3%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended December 18 was 1,716,000, a decrease of 140,000 from the prior week’s level, which was revised down by 3,000. This is the lowest level for insured unemployment since March 7, 2020, when it was 1,715,000. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates for the week ended December 11 were Alaska (3.1%), California (2.7%), Puerto Rico (2.7%), the Virgin Islands (2.5%), New Jersey (2.4%), Illinois (2.3%), Minnesota (2.3%), Hawaii (2.0%), Massachusetts (1.8%), and Nevada (1.8%). The largest increases in initial claims for the week ended December 18 were in Oklahoma (+947), Michigan (+841), Washington (+803), Alabama (+732), and Arkansas (+731), while the largest decreases were in Missouri (-5,549), Pennsylvania (-4,520), Kentucky (-1,915), Georgia (-1,699), and Illinois (-1,321).

Eye on the Week Ahead

There is plenty of important economic data available this week, beginning with the purchasing managers’ manufacturing survey. The manufacturing sector gained traction for much of 2021, only to be sidetracked somewhat by labor shortages and supply chain constrictions. The week ends with the December jobs report. Employment rose by 210,000 in November, well below the monthly average of 550,000.

What I’m Watching This Week – 27 December 2021

The Markets (as of market close December 23, 2021)

Wall Street closed the holiday-shortened week at record levels as investors seemed to speculate that the economic recovery could weather the growing number of coronavirus cases. The S&P 500 closed the week at a record high. The Nasdaq and the Russell 2000 ended up over 3.0%. Ten-year Treasury yields, gold, and crude oil prices climbed higher, while the dollar dipped lower. The market sectors were mixed, with consumer discretionary, communication services, and information technology leading the gainers.

Stocks slid last Monday. Fears that the Omicron variant could undercut the economic rebound, coupled with a setback to President Joe Biden’s social-spending bill, was enough to send stocks reeling. Each of the benchmark indexes listed here fell by at least 1.0%, with the small caps of the Russell 2000 dipping 1.6% to lead the declines. Ten-year Treasury yields inched higher, while the dollar and crude oil prices fell. Materials, consumer discretionary, financials, and industrials led the declines among the market sectors.

Equities jumped higher last Tuesday, reversing course from what had been the biggest three-day drop since September. While the Omicron variant continued to rage around the world, the White House indicated that widespread lockdowns were not anticipated and suggested that any negative impact of the latest virus strain on economic activity would be relatively short and shallow. The Russell 2000 and the Nasdaq each gained more than 2.0%, while the remaining benchmark indexes listed here advanced by at least 1.6%. Bond prices fell, sending yields higher. Crude oil prices, which had dipped below $69.00 per barrel, climbed to $71.46 per barrel. The dollar was relatively unchanged. Energy, consumer discretionary, information technology, and financials led the market sectors.

Wall Street ended last Wednesday in the black with several benchmark indexes closing near session highs. Information technology and consumer discretionary led the way on a day when no market sector lost value. The Nasdaq finished up 1.2%, followed by the S&P 500 (1.0%), the Russell 2000 and the Global Dow (0.9%), and the Dow (0.8%). Ten-year Treasury yields and the dollar dipped, while crude oil prices pushed higher, closing at $72.95 per barrel.

Thursday was the last trading day of the week, as the markets closed Friday in observance of the Christmas holiday. Despite low trading volume, each of the benchmark indexes listed here posted solid gains, with the Global Dow, the Nasdaq, and the Russell 2000 gaining 0.9%. The Dow and the S&P 500 advanced 0.6%. Treasury yields and crude oil prices climbed higher, while the dollar was unchanged. Consumer discretionary, materials and industrials led the market sectors.

The national average retail price for regular gasoline was $3.295 per gallon on December 20, $0.020 per gallon less than the prior week’s price but $1.071 higher than a year ago. Gasoline production decreased during the week ended December 17, averaging 9.9 million barrels per day. U.S. crude oil refinery inputs averaged 15.8 million barrels per day during the week ended December 17 — 148,000 barrels per day more than the previous week’s average. Refineries operated at 89.6% of their operable capacity, the same level as the prior week.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 12/23Weekly ChangeYTD Change
DJIA30,606.4835,365.4435,950.561.65%17.46%
Nasdaq12,888.2815,169.6815,653.373.19%21.45%
S&P 5003,756.074,620.644,725.792.28%25.82%
Russell 20001,974.862,173.932,241.583.11%13.51%
Global Dow3,487.524,027.914,109.072.01%17.82%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.40%1.49%9 bps58 bps
US Dollar-DXY89.8496.6796.06-0.63%6.92%
Crude Oil-CL=F$48.52$71.87$73.782.66%52.06%
Gold-GC=F$1,893.10$1,800.50$1,810.000.53%-4.39%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • The economy accelerated at an annualized rate of 2.3%, according to the third and final estimate of the third-quarter gross domestic product. In the second quarter, the GDP increased 6.7%. The third-quarter advance reflected increases in private inventory investment, personal consumption expenditures, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in exports, residential fixed investment, and federal government spending. Imports, which are a negative in the calculation of GDP, increased. The deceleration in third-quarter GDP compared to the second quarter was more than accounted for by a slowdown in personal consumption expenditures, as spending for goods declined (led by a decrease in motor vehicles and parts), while spending on services also fell (led by a decrease in food services and accommodations). The personal consumption expenditures price index increased 5.3% in the third quarter, compared with an increase of 6.5% in the second quarter. Excluding food and energy prices, the PCE price index increased 4.6% in the third quarter, compared with an increase of 6.1% in the previous quarter.
  • Inflationary pressures continued to be felt in November. According to the latest data from the Bureau of Economic Analysis, prices for consumer goods and services rose 0.6% in November and are up 5.7% over the past 12 months. Excluding food and energy, prices were up 0.5% for November and 4.7% year over year. Personal income increased 0.4% in November as wages and salaries rose 0.5%. Consumer spending also advanced in November, climbing 0.6% following a 1.4% jump in October.
  • Existing home sales rose for the third consecutive month in November. According to the latest data from the National Association of Realtors®, existing home sales accelerated at a rate of 1.9% from October. Sales are still 2.0% below their pace from a year ago. According to the report, the rise in sales may be attributable to buyers trying to make home purchases before mortgage rates rise further in the coming months. The median existing home price for all housing types in November was $353,900, the same price as in October, but 13.9% above the November 2020 price. Total housing inventory at the end of November sat at a 2.1-month supply, down from 2.4 months in October. Single-family home sales rose 1.6% in November. The median existing single-family home price was $362,600 in November, up from October’s price of $360,800.
  • Sales of new single-family homes rose by 12.4% in November compared to the previous month. Nevertheless, sales of new single-family homes were 14.0% below the November 2020 estimate. The median sales price of new houses sold in November was $416,900 ($408,700 in October). The average sales price was $481,700 ($478,200 in October). Available inventory of new single-family homes for sale in November was 402,000, which represents a supply of 6.5 months at the current sales pace.
  • New orders for manufactured durable goods in November increased $6.5 billion, or 2.5%, to $268.3 billion, according to the U.S. Census Bureau. This increase, up six of the last seven months, followed a 0.1% October increase. Excluding transportation, new orders increased 0.8%. Excluding defense, new orders increased 2.0%. Transportation equipment, up following two consecutive monthly decreases, led the increase, climbing $5.0 billion, or 6.5%, to $82.1 billion. Items of particular note include new orders for computers and electronic products, which rose 4.0%; communications equipment advanced 11.1%; and nondefense aircraft and parts jumped 34.1%. New orders for capital goods increased 5.5%, with defense capital goods advancing 16.0%. In November, shipments and unfilled orders rose 0.7%, while inventories advanced 0.6%.
  • For the week ended December 18, there were 205,000 new claims for unemployment insurance, unchanged from the previous week’s level, which was revised down by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended December 11 was 1.4%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended December 11 was 1,859,000, a decrease of 8,000 from the prior week’s level, which was revised up by 22,000. This is the lowest level for insured unemployment since March 14, 2020, when it was 1,770,000. For comparison, last year at this time there were 803,000 initial claims for unemployment insurance, and the rate for unemployment claims was 3.7%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates for the week ended December 4 were Alaska (3.1%), the Virgin Islands (2.9%), Puerto Rico (2.5%), California (2.4%), New Jersey (2.4%), the District of Columbia (2.2%), Minnesota (2.2%), Hawaii (1.9%), Illinois (1.8%), and Massachusetts (1.8%). The largest increases in initial claims for the week ended December 11 were in Missouri (+7,344), Kentucky (+3,600), Illinois (+1,171), Nebraska (+1,032), and Tennessee (+705), while the largest decreases were in New York (-8,157), North Carolina (-4,320), Texas (-4,086), Wisconsin (-3,214), and Oregon (-1,982).

Eye on the Week Ahead

There isn’t much economic data available this week, other than the advance report in the international trade in goods for November. The week between Christmas and New Year’s Day is typically a slow week for trading.

What I’m Watching This Week – 20 December 2021

The Markets (as of market close December 17, 2021)

Omicron, escalating prices, and the tightening of monetary policy by central banks in the United States and around the world took center stage last week. The prospect of higher interest rates in 2022 could make it less appealing to own riskier investments. All of the stock market indexes ended the week in the red, with the tech-heavy Nasdaq taking the biggest hit. Ten-year Treasury yields fell 8 basis points, and the price of gold increased, as some investors took a more defensive stance. The dollar rose and crude oil prices fell, albeit slightly.

Worries about the fast-spreading COVID-19 variant caused U.S. stocks to fall back from a record high on Monday. The Nasdaq and the Russell 2000 led the retreat, both falling 1.4%, while the S&P 500 and the Dow fell 0.9%. The Global Dow was flat. Ten-year Treasury yields dropped to close at 1.42%, and crude oil prices declined slightly, while the dollar advanced. The market sectors were also mixed, with real estate, utilities, and consumer staples showing strength, while energy, consumer discretionary, and information technology lagged.

Stocks dropped again last Tuesday, as a larger-than-expected jump in producer prices caused investors to fret about the potential for more aggressive Fed action against inflation. The Nasdaq posted the largest loss (-1.1%), followed by the Russell 2000 (-1.0%), the S&P 500 (-0.8%), the Dow (-0.3%), and the Global Dow (-0.2%). Crude oil prices slipped after the International Energy Agency announced that the global oil market has returned to surplus due to fast-spreading Omicron and the resulting reduction in oil demand.

On Wednesday, news that a more hawkish Federal Reserve now expects to wind down stimulus and raise interest rates more rapidly than previously thought was well received by investors. Each of the benchmark indexes listed here posted gains, led by the Nasdaq, which bounced back 2.2%. The Russell 2000 gained 1.7%, followed by the S&P 500 (1.6%), the Dow (1.1%), and the Global Dow (0.3%). The 10-year Treasury yield inched up to 1.46%.

A sharp drop in the shares of large technology companies dragged the U.S. stock market lower last Thursday. The Nasdaq dropped 2.5%, marking the fourth consecutive day that prices swung more than 1% in either direction. The Russell 2000 (-2.0%), the S&P 500 (-0.9%), and the Dow (-0.1%) also fell, while the Global Dow rose (1.0%). Information technology and consumer discretionary suffered the largest declines. Despite losses in the major benchmark indexes, 8 of the market’s 11 sectors saw gains, led by financials and materials. Treasury yields ticked down, the dollar weakened, and crude oil prices rose.

Equities generally closed lower after a volatile week on Friday. The Russell 2000 stood out by posting a 1.0% gain. The Dow declined 1.5%, followed by the S&P 500 (-1.0%) and the Global Dow (-0.9%). The Nasdaq was flat. Treasury yields dipped, crude oil prices dropped, and the dollar advanced. All of the market sectors lost ground, with financials (-2.3%) and energy (-2.2%) tumbling the furthest.

The national average retail price for regular gasoline was $3.315 per gallon on December 13, $0.026 per gallon less than the prior week’s price but $1.157 higher than a year ago. Gasoline production increased during the week ended December 10, averaging 10.0 million barrels per day. U.S. crude oil refinery inputs averaged 15.7 million barrels per day during the week ended December 10 — 115,000 barrels per day less than the previous week’s average. Refineries operated at 89.8% of their operable capacity, the same level as the prior week.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 12/17Weekly ChangeYTD Change
DJIA30,606.4835,970.9935,365.44-1.68%15.55%
Nasdaq12,888.2815,630.6015,169.68-2.95%17.70%
S&P 5003,756.074,712.024,620.64-1.94%23.02%
Russell 20001,974.862,211.812,173.93-1.71%10.08%
Global Dow3,487.524,052.904,027.91-0.62%15.49%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.48%1.40%-8 bps49 bps
US Dollar-DXY89.8496.0596.670.65%7.60%
Crude Oil-CL=F$48.52$71.97$71.87-0.14%48.12%
Gold-GC=F$1,893.10$1,782.60$1,800.501.00%-4.89%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Producer prices advanced 0.8% in November after climbing 0.6% in each of the previous three months. Producer prices have risen 9.6% over the past 12 months ended in November, the largest 12-month increase in the history of the index (November 2010). Prices for final demand less foods, energy, and trade services increased 6.9% from the previous November, the largest advance since 12-month data was first calculated in August 2014. Prices for final demand services rose 0.7% in November, the eleventh consecutive advance, while prices for final demand goods rose 1.2%. The advances in producer prices for goods and services were broad based.
  • Retail sales rose 0.3% in November after an increase of 1.8% in October, confirming that some holiday spending was pulled forward in anticipation of supply shortages and rising prices. On the whole, consumers have been willing and able to spend this year. For the 12 months ended in November, retail sales were up 18.2%, and retail trade sales were up 16.1%. Gasoline station sales increased 1.6% in November and were up 52.3% from November 2020, while food services and drinking places increased 3.9% and were 37.4% above last year.
  • Import prices increased 0.7% last month following a 1.5% increase in October. Natural gas prices jumped 27.4% in November, but both higher fuel and nonfuel prices contributed to the advance. Prices for imports rose 11.7% since November 2020, the largest 12-month increase since the year ended September 2011. Overall, import fuel prices increased 86.1% over the past 12 months. Petroleum prices have risen 85.8% for the year, while natural gas prices have risen 108.7%. Prices for U.S. exports rose 1.0% in November after a 1.6% advance in October. U.S. export prices were up 18.2% since November 2020, the largest 12-month advance since the data was first published in September 1984.
  • The Federal Reserve decided to keep the target range for the federal funds rate at 0%-0.25%. Inflation has exceeded 2% for some time, but the Committee expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment. In light of inflation developments and further improvement in the labor market, the Committee will reduce the monthly pace of its net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities. Published projections showed that Fed officials believe economic conditions will call for three rate increases in 2022.
  • The number of building permits for new residential construction rose 3.6% in November. Building permits for single-family construction increased 2.7%. Overall, the number of building permits issued for residential construction is 0.9% above the November 2020 rate. Housing starts surged 11.8% last month, along with single-family housing starts (11.3%). Housing completions rose 4.1% in November from the previous month and were 3.1% above the November 2020 pace. Single-family home completions were essentially unchanged.
  • Industrial production rose 0.5% in November after rising 1.7% in October. For the industrial sector as a whole, non-energy production advanced 0.9%, while the output of energy goods fell 0.4%. Manufacturing output rose 0.7% last month, led by a 2.2% gain in motor vehicles and parts. Overall, total industrial production in November was 5.3% above its year-earlier level and the highest since September 2019. Capacity utilization for the industrial sector improved 0.3 percentage point to 76.8%, but was still 2.8 percentage points below its long-run (1972-2020) average.
  • For the week ended December 11, there were 206,000 new claims for unemployment insurance, a decrease of 18,000 from the previous week’s level, which was revised up by 4,000. The four-week moving average was 203,750, the lowest level for this average since November 15, 1969. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended December 4 was 1.4%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended December 4 was 1,845,000, a decrease of 154,000 from the prior week’s level, which was revised up by 7,000. For comparison, last year at this time there were 929,000 initial claims for unemployment insurance, and the rate for unemployment claims was 3.7%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates for the week ended November 27 were Alaska (3.2%), California (2.9%), the Virgin Islands (2.7%), the District of Columbia (2.6%), Puerto Rico (2.6%), New Jersey (2.5%), Hawaii (2.3%), Illinois (2.2%), Minnesota (2.2%), and Georgia (2.1%). The largest increases in initial claims for the week ended December 4 were in Texas (+8,639), New York (+8,523), California (+8,487), Michigan (+4,182), and Illinois (+3,390), while the largest decreases were in Virginia (-3,096) and North Carolina (-1,718).

Eye on the Week Ahead

In consideration of the Christmas-New Year holidays next week, several important economic reports are available this week. The final report on third-quarter gross domestic product is available this week. The economy advanced at an annualized rate of 2.1%, according to the second estimate. November data on sales of new and existing homes is also out this week. October proved to be a good month for the housing sector, although residential sales may curtail a bit in November. The personal income and outlays report is also out, albeit a week earlier than normal. According to the previous report, prices at the consumer level have risen 5.0% for the 12 months ended in October.

What I’m Watching This Week – 13 December 2021

The Markets (as of market close December 10, 2021)

Stocks closed last week higher for the first time in three weeks. The S&P 500 enjoyed its best weekly gain since February. Fears over the effects of the Omicron variant on economic growth seemed to subside somewhat as each of the benchmark indexes recorded notable gains. Information technology drove much of the rally, advancing 6.0% last week. Markets also seemed to react to favorable economic news. Weekly unemployment claims were the lowest since 1969, while the number of new jobs available rose to 11.0 million. Inflation rose again, but in line with expectations, reinforcing the premise that the Federal Reserve will accelerate the tapering of its bond purchases. The Dow posted the largest weekly gain, followed by the S&P 500, the Nasdaq, the Global Dow, and the Russell 2000. Treasury yields and crude oil prices advanced, while the dollar and gold prices dipped.

Investors turned more bullish last Monday following a stretch of volatility sparked by concerns over the spread of the Omicron variant. Each of the benchmark indexes listed here posted gains, led by the Russell 2000 (2.1%), followed by the Dow (1.9%), the Global Dow (1.3%), the S&P 500 (1.2%), and the Nasdaq (0.9%). Yields on 10-year Treasuries jumped 678 basis points to 1.43%. Crude oil prices climbed to $69.95 per barrel, while the dollar was mixed.

Last Tuesday, Wall Street staged the biggest rally since March on hopes that the Omicron variant won’t weaken the economy. Tech stocks, which had been floundering, led the charge, pushing the Nasdaq up 3.0%, followed by the Russell 2000 (2.3%), the S&P 500 (2.1%), the Global Dow (1.6%), and the Dow (1.4%). Each of the market sectors advanced, led by information technology, consumer discretionary, and energy. Ten-year Treasury yields climbed to 1.48%. Crude oil prices rose to $71.54 per barrel. The dollar was unchanged.

Stocks continued to push higher last Wednesday as the S&P 500 and the Nasdaq inched toward record highs. The small caps of the Russell 2000 led the indexes, gaining 0.8%, ahead of the Nasdaq (0.6%), the S&P 500 (0.3%), the Global Dow (0.3%), and the Dow (0.1%). Yields on 10-year Treasuries rose again, reaching 1.5% at the close of trading. The dollar fell, while crude oil prices advanced for the third consecutive day, hitting $72.62 per barrel. Among the market sectors, communication services (0.8%) and health care (0.7%) climbed higher, while financials (-0.5%) and consumer staples (-0.4%) fell.

The three-day stock market rally ended last Thursday as losses in consumer discretionary, information technology, and real estate led the market lower. The volatile Russell 2000 dropped the furthest, down 2.3%, followed by the Nasdaq (-1.7%), the S&P 500 (-0.7%), and the Global Dow (-0.4). The Dow was little changed. Bond prices rose, pulling yields lower. Crude oil prices fell to $70.49 per barrel. The dollar inched higher. Among the market sectors, only health care and consumer staples posted gains.

Equities closed out the week on a high note last Friday. Several of the benchmark indexes listed here posted solid gains, led by the S&P 500 (1.0%), followed by the Nasdaq (0.7%), the Dow (0.6%), and the Global Dow (0.3%). The Russell 2000 dipped 0.4%. Ten-year Treasury yields inched higher, while crude oil prices rose 1.5% to $71.97 per barrel. The dollar slipped lower. Many market sectors rose, with information technology, consumer staples, and energy leading the way.

The national average retail price for regular gasoline was $3.341 per gallon on December 6, $0.039 per gallon less than the prior week’s price but $1.185 higher than a year ago. Gasoline production decreased during the week ended December 3, averaging 9.6 million barrels per day. U.S. crude oil refinery inputs averaged 15.8 million barrels per day during the week ended December 3 — 153,000 barrels per day more than the previous week’s average. Refineries operated at 89.8% of their operable capacity, up from the prior week’s level of 88.8%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 12/10Weekly ChangeYTD Change
DJIA30,606.4834,580.0835,970.994.02%17.53%
Nasdaq12,888.2815,085.4715,630.603.61%21.28%
S&P 5003,756.074,538.434,712.023.82%25.45%
Russell 20001,974.862,159.312,211.812.43%12.00%
Global Dow3,487.523,944.604,052.902.75%16.21%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.34%1.48%14 bps57 bps
US Dollar-DXY89.8496.1796.05-0.12%6.91%
Crude Oil-CL=F$48.52$66.16$71.978.78%48.33%
Gold-GC=F$1,893.10$1,783.80$1,782.60-0.07%-5.84%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Inflationary pressures are showing no signs of moderating following the latest Consumer Price Index report. Prices rose 0.8% in November after advancing 0.9% in October. Over the last 12 months, the CPI has risen 6.8%, the largest 12-month increase since the period ended June 1982. The November price hike was the result of broad increases in most component indexes, similar to the previous month. The indexes for gasoline (6.1%), shelter (0.5%), food (0.7%), used cars and trucks (2.5%), and new vehicles (1.1%) were among the larger contributors. The energy index rose 3.5% in November. The fuel oil index increased 3.5%. Within the food index, the index for food at home rose 0.8%. The apparel index climbed 1.3%.
  • The international trade in goods and services deficit was $67.1 billion in October, down $14.3 billion, or 17.6%, from $81.4 billion in September. October exports were $223.6 billion, $16.8 billion, or 8.1%, more than September exports. October imports were $290.7 billion, $2.5 billion, or 0.9%, more than September imports. Year to date, the goods and services deficit increased $161.7 billion, or 29.7%, from the same period in 2020. Exports increased $315.1 billion, or 17.9%. Imports increased $476.8 billion, or 20.7%. Of particular note in October relative to the trade in goods (excluding services), the deficit with China decreased $3.2 billion to $28.3 billion; the deficit with the European Union decreased $2.1 billion to $16.6 billion; the deficit with Mexico increased $0.8 billion to $9.7 billion. On the other hand, the October figures show trade in goods surpluses, in billions of dollars, with South and Central America ($4.5), Hong Kong ($2.6), Brazil ($1.3), the United Kingdom ($1.0), and Singapore ($0.5).
  • November, the second month of fiscal year 2022, saw the budget deficit grow to $191.3 billion. The October deficit was $165.1 billion. In November, government receipts were little changed at $281.2 billion. Government outlays increased by $23.5 billion to $472.5 billion in November. For the first two months of the fiscal year, the government deficit sits at $356.4 billion, $73.0 billion less than the same period in the previous fiscal year.
  • The number of job openings increased in October, according to the latest Job Openings and Labor Turnover Summary. Job openings increased to 11.0 million (+431,000) and the job openings rate inched up 0.2 percentage point to 6.9%. Job openings increased in several industries with the largest increases in accommodation and food services (+254,000); nondurable goods manufacturing (+45,000); and educational services (+42,000). Job openings decreased in state and local government, excluding education (-115,000). The number of hires, at 6.5 million, was little changed from September. Total separations edged down to 5.9 million (-255,000). Within separations, the number of quits decreased 205,000 to 4.2 million, while the number of layoffs and discharges was little changed at 1.4 million. Over the 12 months ended in October, hires totaled 73.8 million and separations totaled 68.1 million, yielding a net employment gain of 5.7 million.
  • For the week ended December 4, there were 184,000 new claims for unemployment insurance, a decrease of 43,000 from the previous week’s level, which was revised up by 5,000. This is the lowest level for initial claims since September 6, 1969, when it was 182,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended November 27 was 1.5%, an increase of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended November 27 was 1,992,000, an increase of 38,000 from the prior week’s level, which was revised down by 2,000. For comparison, last year at this time there were 853,000 initial claims for unemployment insurance, and the rate for unemployment claims was 4.0%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates for the week ended November 20 were Alaska (2.9%), the District of Columbia (2.8%), New Jersey (2.3%), Puerto Rico (2.3%), California (2.1%), Hawaii (1.8%), Minnesota (1.8%), Nevada (1.8%), Illinois (1.7%), and Massachusetts (1.7%). The largest increases in initial claims for the week ended November 27 were in North Carolina (+2,461), Wisconsin (+1,081), Ohio (+300), Connecticut (+251), and Idaho (+249), while the largest decreases were in Virginia (-6,548), California (-5,613), Texas (-5,447), Michigan (-2,640), and New Jersey (-2,371).

Eye on the Week Ahead The Federal Open Market Committee meets this week. Based on “hawkish” statements from Fed Chair Jerome Powell and other members, it is likely the Committee will further accelerate the tapering of its asset purchases. It is also possible that the timetable for raising interest rates could be moved up to mid-2022.

What I’m Watching This Week – 6 December 2021

The Markets (as of market close December 3, 2021)

Wall Street could not maintain its early momentum, closing the week down. Lower-than-expected employment, new reports of Omicron variant cases, and a hawkish stance from Federal Reserve Chair Jerome Powell led to uncertainty in the market. Each of the benchmark indexes ended the week lower, led by the small caps of the Russell 2000 and the tech-heavy Nasdaq. Treasury yields fell 14 basis points to 1.34%. Crude oil prices continued the longest streak of weekly losses since 2018, falling 2.9%, a skid that has run for six consecutive weeks. The dollar and gold prices changed little. Only utilities and real estate were able to eke out gains among the market sectors.

Stocks rallied last Monday, following the previous week’s Omicron-related selloff. President Biden assured Americans the response to the Omicron variant would not involve shutdowns or lockdowns. The Nasdaq (1.9%) and the S&P 500 (1.3%) led the benchmark indexes, followed by the Dow (0.7%) and the Global Dow (0.1%). The Russell 2000 (-0.2%) ended the day in the red. Sector gains were broad-based, with information technology, consumer discretionary, and utilities outperforming. Ten-year Treasury yields and crude oil prices advanced, while the dollar was mixed.

Wall Street ended the day lower last Tuesday. Chair Jerome Powell admitted that recent inflationary pressures are more than just “transitory,” the emergence of the Omicron variant could pose downside risks to employment and economic recovery, and that the Fed may accelerate the tapering of asset purchases. That was apparently enough to drive stocks lower, with each of the benchmark indexes falling by more than 1.6%. The Russell 2000 dipped 1.92%, followed by the S&P 500 and the Dow, which lost 1.9%. The Nasdaq fell 1.6%. Bond prices spiked, with the yield on 10-year Treasuries dropping over 10.9% to close at 1.44%. Crude oil prices fell to $66.80 per barrel, and the dollar declined.

Last Wednesday, stocks suffered their worst back-to-back sessions since October 2020. The first Omicron case was confirmed in California, while new cases were reported in the United Kingdom, Switzerland, and Brazil. A decline in tech shares pulled the Nasdaq down 1.8%. The Dow fell 1.3%. The S&P 500 dipped 1.2%. The Russell 2000 fell the furthest on the day, losing 2.3%. The Global Dow inched up 0.5%. Crude oil prices fell to $65.35 per barrel. Ten-year Treasury yields declined 62 basis points to 1.43%. The dollar was mixed.

Wall Street rebounded last Thursday, notching its biggest advance since October as dip buyers nabbed some of the hardest-hit shares during the two-day selloff. The Russell 2000 jumped 2.7%. The Dow gained 1.8%. The S&P 500 rose 1.4%. The Nasdaq and the Global Dow climbed 0.8%. Crude oil prices increased to $66.83 per barrel. Treasury yields and the dollar also advanced. Energy, financials, industrials, and real estate led the market sectors.

Stocks closed out a volatile week in the red last Friday. While equities rallied for most of the day, stocks ultimately closed lower on weaker-than-expected jobs data. Among the benchmark indexes, the Russell 2000 (-2.4%) and the Nasdaq (-1.9%) fell the furthest, followed by the S&P 500 (-0.8%), the Global Dow (-0.3%), and the Dow (-0.2%). Ten-year Treasury prices climbed higher, sending yields lower. Crude oil prices and the dollar declined. Consumer staples, utilities, and health care were the only sectors to close in the black.

The national average retail price for regular gasoline was $3.380 per gallon on November 29, $0.015 per gallon less than the prior week’s price but $1.260 higher than a year ago. Gasoline production decreased during the week ended November 26, averaging 9.6 million barrels per day. U.S. crude oil refinery inputs averaged 15.6 million barrels per day during the week ended November 26 — 9,000 barrels per day less than the previous week’s average. Refineries operated at 88.8% of their operable capacity, up marginally from the prior week’s level of 88.6%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 12/3Weekly ChangeYTD Change
DJIA30,606.4834,899.3434,580.08-0.91%12.98%
Nasdaq12,888.2815,491.6615,085.47-2.62%17.05%
S&P 5003,756.074,594.624,538.43-1.22%20.83%
Russell 20001,974.862,245.942,159.31-3.86%9.34%
Global Dow3,487.523,962.953,944.60-0.46%13.11%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.48%1.34%-14 bps43 bps
US Dollar-DXY89.8496.0996.170.08%7.05%
Crude Oil-CL=F$48.52$68.15$66.16-2.92%36.36%
Gold-GC=F$1,893.10$1,785.50$1,783.80-0.10%-5.77%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Employment rose by only 210,000 in November, well short of this year’s monthly average of 555,000. However, the unemployment rate fell 0.4 percentage point to 4.2%, and the number of unemployed persons dropped by 542,000 to 6.9 million. Both measures are well below their February-April 2020 highs but remain above their pre-pandemic levels (3.5% and 5.7 million, respectively). Employment has increased by 18.5 million since April 2020 but is down by 3.9 million, or 2.6%, from its pre-pandemic level in February 2020. In November, notable job gains occurred in professional and business services, transportation and warehousing, construction, and manufacturing. Employment in retail trade declined over the month. The labor force participation rate edged up to 61.8% in November — 1.5 percentage points lower than in February 2020. The employment-population ratio increased by 0.4 percentage point to 59.2% last month — lower than the February 2020 figure of 61.1%. The number of persons not in the labor force who currently want a job was 5.9 million in November, little changed over the month but up by 849,000 since February 2020. In November, the number of employed persons who teleworked because of the coronavirus pandemic declined by 0.3 percentage point to 11.3%. In November, 3.6 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic. In November, average hourly earnings increased by $0.08 to $31.03. Over the past 12 months, average hourly earnings have increased by 4.8%. The average work week for all employees increased by 0.1 hour to 34.8 hours in November.
  • According to the IHS Markit US Manufacturing Purchasing Managers’ Index™, production rose in November, but at the second-slowest rate since September 2020. Survey respondents noted that the lag in production was attributable to supply delays, labor shortages, and a slowdown in new orders. The rate of cost inflation also increased from October. Although manufacturers still tried to pass on greater costs to clients, data indicated some pushback on higher prices from customers.
  • The IHS Markit U.S. Services PMI Business Activity Index registered 58.0 in November, down from 58.7 in October. Although the pace of expansion was stronger than the series average of 54.8, it was subdued in comparison to rates seen throughout 2021. November data indicated a strong rise in new business across the service sector, but supply-chain issues and higher selling prices often acted as deterrents to customers placing orders. The rate of cost inflation was the second-sharpest since October 2009, as higher supplier and fuel costs, coupled with rising wages, drove the increase in input prices.
  • For the week ended November 27, there were 222,000 new claims for unemployment insurance, an increase of 28,000 from the previous week’s level, which was revised down by 5,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended November 20 was 1.4%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended November 20 was 1,956,000, a decrease of 107,000 from the prior week’s level, which was revised up by 14,000. This is the lowest level for insured unemployment since March 14, 2020, when it was 1,770,000. For comparison, last year at this time there were 719,000 initial claims for unemployment insurance, and the rate for unemployment claims was 3.8%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates for the week ended November 13 were Puerto Rico (3.7%), the District of Columbia (3.5%), the Virgin Islands (3.3%), Alaska (2.8%), California (2.7%), New Jersey (2.4%), Hawaii (2.3%), Illinois (2.3%), Nevada (2.0%), and Pennsylvania (2.0%). The largest increases in initial claims for the week ended November 20 were in Virginia (+12,703), New Jersey (+2,061), Michigan (+1,926), Oklahoma (+1,490), and Minnesota (+1,465), while the largest decreases were in California (-7,233), Kentucky (-3,910), the District of Columbia (-1,679), Missouri (-1,519), and Massachusetts (-1,410).

Eye on the Week Ahead

The first report on inflationary trends is available this week with the release of the November Consumer Price Index. Prices rose 0.9% in October and have risen 6.2% over the past 12 months. With the holiday season in full swing, consumer prices are not expected to show any significant slowdown.

Monthly Market Review – November 2021

The Markets (as of market close November 30, 2021)

Stocks ended November generally lower, with only the Nasdaq able to eke out a gain. The Global Dow and the Russell 2000 each lost more than 4.25%. The Dow fell 3.7% and the S&P 500 dropped 0.8%. The Nasdaq gained 0.3%.

Despite some positive economic news, global and domestic markets were sent reeling in November following reports of a new coronavirus strain. The Omicron variant, first discovered in South Africa, prompted several countries, including the United States, to impose travel restrictions. Federal Reserve Chair Jerome Powell indicated that the coronavirus variant could hinder economic recovery efforts and impact the country’s response to surging inflation. Nevertheless, Powell also suggested that the central bank could end its asset purchase program a few months sooner than planned, apparently signaling confidence in the economic recovery, despite concerns over the Omicron variant. Inflation continued to rise, as supply-chain bottlenecks and labor shortages prompted price hikes at both the manufacturing and retail levels.

The Omicron variant also impacted crude oil prices, driving them to the biggest monthly loss since early 2020. Prior to news of the variant, several countries, including the United States, responded to rising oil prices by planning to release of several million barrels of oil from strategic reserves. Bond prices rose in anticipation of rising interest rates, sending yields lower, with 10-year Treasury yields falling 11 basis points to close the month at 1.44%.

There were some positive economic signs in November. Industrial production rose, while sales of new and existing homes increased. More than 500,000 new jobs were added, and weekly claims for unemployment insurance fell to their lowest level since 1969. November saw the dollar climb higher, while gold prices dropped nearly 1.0%. Prices at the pump increased, as the national average retail price for regular gasoline was $3.395 per gallon on November 22, up from the October 25 price of $3.383 per gallon.

Stock Market Indexes

Market/Index2020 ClosePrior MonthAs of November 30Monthly ChangeYTD Change
DJIA30,606.4835,819.5634,483.72-3.73%12.67%
Nasdaq12,888.2815,498.3915,537.690.25%20.56%
S&P 5003,756.074,605.384,567.00-0.83%21.59%
Russell 20001,974.862,297.192,198.91-4.28%11.35%
Global Dow3,487.524,091.613,913.00-4.37%12.20%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.55%1.44%-11 bps53 bps
US Dollar-DXY89.8494.1295.901.89%6.75%
Crude Oil-CL=F$48.52$83.27$66.97-19.57%38.03%
Gold-GC=F$1,893.10$1,784.201,771.10-0.73%-6.44%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark the performance of specific investments.

Latest Economic Reports

  • Employment: The pace of job gains accelerated in October, as 531,000 new jobs were added. This followed a revised September total of 312,000 new jobs. Through the first 10 months of the year, monthly job growth has averaged 582,000. The unemployment rate declined by 0.2 percentage point to 4.6% in October. The number of unemployed persons, at 7.4 million, continued to trend down (7.7 million in September). Employment has increased by 18.2 million since a recent trough in April 2020 but is down by 4.2 million, or 2.8%, from its pre-pandemic level in February 2020. In October, notable job gains occurred in leisure and hospitality (164,000), food services and drinking places (119,000), professional and business services (100,000), retail trade (35,000), transportation and warehousing (54,000), and manufacturing (60,000). Employment decreased in local government education and state government education (-43,000 and -22,000, respectively). Among the unemployed, the number of permanent job losers declined from 2.3 million in September to 2.1 million in October but is 828,000 higher than in February 2020. The number of persons not in the labor force who currently want a job was 6.0 million, unchanged from the September total. The labor force participation rate, at 61.6%, was unchanged from the September rate and has remained within a narrow range of 61.4% to 61.7% since June 2020. The employment-population ratio was 58.8% in October, up 0.1 percentage point from the previous month. This measure is up from its low of 51.3% in April 2020 but remains below the figure of 61.1% in February 2020. In October, 11.6% of employed persons teleworked because of the pandemic, a decrease of 1.6 percentage point from the prior month. In October, 3.8 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic; this is down from 5.0 million in September. Average hourly earnings rose $0.11 to $30.96 in October. Earnings have increased 4.9% since October 2020. The average work week in October was 34.7 hours, a decrease of 0.1 hour from September.
  • The total number of claims for unemployment insurance fell in November. According to the latest weekly totals, as of November 13 there were 2,049,000 workers receiving unemployment insurance benefits, down from the October 16 total of 2,243,000. The unemployment rate for the week ended November 13 was 1.5%, down 0.2 percentage point from the October 16 rate of 1.7%. During the week ended November 6, Extended Benefits were available in four states/territories: Alaska, Connecticut, New Jersey, and New Mexico; 40 states reported 334,750 continued weekly claims for Pandemic Unemployment Assistance benefits (270,013 on October 9), and 41 states reported 151,556 continued claims for Pandemic Emergency Unemployment Compensation benefits (244,379 on October 9).
  • FOMC/interest rates: The Federal Open Market Committee met in November. While the Committee left the federal funds target range rate at its current 0.00%-0.25%, it decided to begin tapering its asset purchases, reducing Treasury and mortgage-backed securities buybacks by $10 billion and $5 billion per month, respectively.
  • GDP/budget: According to the second estimate from the Bureau of Economic Analysis, the economy accelerated at an annual rate of 2.1% in the third quarter after advancing 6.7% in the second quarter. Consumer spending, as measured by personal consumption expenditures, increased 1.7% in the third quarter after rising 12.0% in the prior quarter. The personal consumption price index (prices for consumer goods and services) rose 5.3% in the third quarter after climbing 6.5% in the second quarter. Excluding food and energy, the price index increased 4.5% in the third quarter compared with an increase of 6.1% in the second quarter. In the third quarter, fixed investment dipped 1.1% following a 3.3% increase in the second quarter, and residential fixed investment fell 8.3% after decreasing 11.7% in the second quarter. Exports slid 3.0% in the third quarter after increasing 7.6% in the second quarter. Imports (which are a negative in the calculation of GDP) increased 5.8% in the third quarter (7.1% in the second quarter). Overall, third-quarter GDP reflected the continued economic impact of the COVID-19 pandemic. A resurgence of COVID-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country. Also, government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households decreased.
  • The Treasury budget deficit for October came in at $165.1 billion, 42.0% lower than the deficit in the same month last year. Compared to October 2020, government receipts rose 19.0% to $283.9 billion, while government expenditures decreased 14.0% to $449.0 billion. Individual income tax receipts rose 32.0% in October, while corporate tax receipts rose 72.0%. Medicare expenditures declined by 44.0% compared to October 2020, national defense expenditures dipped by 14.0%, and spending on agriculture dropped 62.0%.
  • Inflation/consumer spending: Personal income increased 0.5% in October after falling 1.0% in September. Disposable (after-tax) personal income rose 0.3% in October after decreasing 1.3% the previous month. The increase in personal income in October primarily reflected increases in wages (0.8%), income from assets (0.9%), and dividend income (1.2%). Consumer spending rose 1.3% in October following a 0.6% increase in September. Consumer prices continued to rise in October, increasing 0.6%, after climbing 0.4% in September. Excluding food and energy, consumer prices advanced 0.4% in October. Prices have risen 5.0% since October 2020, and 4.1% excluding food and energy.
  • Prices at the consumer level continued to advance in October, increasing 0.9% following a 0.4% rise in September. Prices for consumer goods and services have increased 6.2% since October 2020. Excluding food and energy, consumer prices rose 0.6% in October (0.2% in September) and 4.6% since October 2020. Prices for food rose 0.9% in October, the same increase as in September. Energy prices rose 4.8% in October (1.3% in September), while gasoline prices jumped 6.1% (1.2% in September) and fuel oil prices climbed 12.3% (3.9% in September). Prices for new vehicles and used cars and trucks rose 1.4% and 2.5%, respectively, in October.
  • Producer prices continued to climb in October, increasing 0.6% after rising 0.5% in September. Producer prices increased 8.6% for the 12 months ended in October. Prices for services in October rose 0.2%, unchanged from the previous month, while prices for goods moved up 1.2% (1.3% in September). Producer prices less foods, energy, and trade services advanced 0.4% in October (0.1% in September) and have risen 6.2% since October 2020. Energy prices jumped 4.8% in October, with one-third of that advance attributable to a 6.7% jump in gasoline prices. The October increase in producer prices for services was driven by a 0.4% climb in trade services (trade services measure the change in margins received by wholesalers and retailers).
  • Housing: Existing home sales rose 0.8% in October after advancing 7.0% in September. Nevertheless, existing home sales have dropped 5.8% from a year ago. The median existing-home price was $353,900 in October ($352,800 in September), up 13.1% from October 2020 ($313,000). Total housing inventory at the end of October dropped 0.8% from September’s supply and is down 12.0% from one year ago. In October, unsold inventory sat at a 2.4-month supply at the present sales pace (2.5-month supply in September). Sales of existing single-family homes also increased in October, climbing 1.3% after climbing 7.7% in September. Year over year, sales of existing single-family homes are down 5.8%. The median existing single-family home price was $360,800 in October, down from $359,700 in September.
  • New single-family home sales increased in October, advancing 0.4% after increasing 7.0% in September (revised). Despite the recent monthly increase, sales of new single-family homes have decreased 23.1% from October 2020. The median sales price of new single-family houses sold in October was $407,700 ($404,700 in September). The October average sales price was $477,800 ($457,200 in September). The inventory of new single-family homes for sale in October represents a supply of 6.3 months at the current sales pace, up from the September estimate of 6.1 months.
  • Manufacturing: Industrial production rose 1.6% in October after falling 1.3% in September. About half of the gain in October reflected a recovery from the effects of Hurricane Ida. Manufacturing output increased 1.2% in October following a 0.7% decreased the previous month. The output of utilities rose 1.2% (3.7% in September), and mining output stepped up 4.1% following a 2.3% dip in September. Overall, total industrial production in October was 5.1% above its year-earlier level and at its highest reading since December 2019.
  • New orders for durable goods decreased $1.2 billion, or 0.5%, in October after falling 0.4% in September. Transportation equipment, down three of the last four months, drove the October decline, falling $2.0 billion, or 2.6%. Excluding transportation, new orders rose 0.5% in October. New orders for aircraft and parts were particularly weak, with defense aircraft and parts falling 21.8%, while nondefense aircraft dipped 14.5%. Otherwise, shipments (1.5%), unfilled orders (0.2%), and inventories (0.6%) advanced in October. New orders for nondefense capital goods decreased 1.2% in October after falling 4.4% the previous month.
  • Imports and exports: October import prices rose 1.2% following a 0.4% advance in September. The October increase was the largest monthly advance since a 1.3% rise in May. Import prices rose 10.7% over the 12 months ended in October (9.2% for the 12 months ended in September), the largest year-over-year increase since June 2021. Import fuel prices jumped 8.6% in October after advancing 3.9% in September. Import fuel prices rose 86.7% over the past year. Both the 86.7% advance in petroleum prices and a 134.0% increase in natural gas prices factored into the 12-month rise in import fuel prices in October. Export prices advanced 1.5% in October after edging up 0.1% in September. The October increase was the largest one-month increase since a 2.3% rise in May 2021. For the year ended in October, export prices rose 18.0%, the largest 12-month increase since the series was first published in September 1983.
  • The international trade in goods advance report showed the October deficit decreased by $14.1 billion, or 14.6%, to $89.2 billion. Exports increased $15.3 billion, or 10.7%, while imports rose $1.1 billion, or 0.5%. For the 12 months ended in October, exports have risen 25.5%, while imports have increased 16.3%.
  • The latest information on international trade in goods and services, out November 4, was for September and showed that the goods and services trade deficit increased by 11.2% to $80.9 billion. September exports dipped 3.0%, while imports advanced 0.6%. Year to date, the goods and services deficit increased $158.7 billion, or 33.1%, from the same period in 2020. Exports increased $274.1 billion, or 17.4%. Imports increased $432.8 billion, or 21.1%.
  • International markets:Fears that the economic recovery might be slowed by the spread of the Omicron coronavirus variant impacted global markets. Several countries imposed travel bans and other restrictions in response to the potentially more contagious variant. A new government took control in Germany, with Social Democrat leader Olaf Scholz succeeding Angela Merkel as chancellor. Expectations for higher U.S. interest rates pulled the Japanese yen to a three-year low versus the dollar. Relations between the United States and China remained tense over the status of Taiwan and trade issues. The Chinese real estate sector remained troubled, as high-profile developers tried to avert default on obligations to creditors. In the markets for November, the STOXX Europe 600 Index dropped 3.0%; the United Kingdom’s FTSE fell 2.8%; Japan’s Nikkei 225 Index dipped 5.8%; and China’s Shanghai Composite Index rose 1.7%.
  • Consumer confidence: According to the latest report from The Conference Board, consumer confidence decreased in November for the fourth time in the last five months. The Consumer Confidence Index® stands at 109.5 in November, down from 111.6 in October. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, fell to 142.5 in November from 145.5 the previous month. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, registered 87.6 in November, down from 89.0 in October.

Eye on the Month Ahead

December will not only close 2021 but will likely be a precursor to what lies ahead in 2022. The Federal Open Market Committee meets mid-month and is expected to address rising inflationary pressures. The FOMC could accelerate the reduction of bond purchases and possibly consider raising interest rates sometime in 2022. Job growth accelerated in September and October, adding nearly 850,000 new jobs. November’s figure is projected to be in the range of 350,000 new jobs added. Industrial production is expected to expand in November despite being hampered by supply bottlenecks and labor shortages.

What I’m Watching This Week – 29 November 2021

The Markets (as of market close November 26, 2021)

Thanksgiving week proved to be a tumultuous one for investors. Each of the benchmark indexes listed here ended the week in the red following news of a new COVID variant in South Africa. In response, several countries, including the United States, initiated travel bans and tightened border controls. Crude oil prices fell 13.5% in the week as the new coronavirus strain sparked fears that lockdowns would hurt global demand. The yield on 10-year Treasuries fell 10 basis points to close below 1.55% for the first time in several sessions.

A selloff in tech shares pulled the Nasdaq down 1.3% to open the week last Monday. The Russell 2000 fell 0.5%, the S&P 500 dipped 0.3%, and the Global Dow lost 0.1%. The Dow inched up 0.1%. Treasury yields advanced nearly 600 basis points to close at 1.62%. Crude oil prices increased 0.5% to $76.35 per barrel. The dollar rose, while gold prices slipped. The market sectors were mixed, with energy, financials, consumer staples, and utilities climbing higher, while communication services, information technology, consumer discretionary, real estate, and health care fell.

The Nasdaq (-0.5%) fell for the second consecutive day last Tuesday as tech stocks continued to tumble. Energy and financials led the market sectors, helping to push the S&P 500 up 0.2%. The Russell 2000 inched 0.2% lower, while the Dow (0.6%) and the Global Dow (0.2%) advanced. Ten-year Treasury yields rose, as bond prices fell. Crude oil prices increased ahead of a move by several countries, including the United States and China, to tap their strategic oil supplies. The dollar was mixed.

Gains in real estate and energy stocks helped drive the S&P 500 higher last Wednesday. The Nasdaq reversed course and led the benchmark indexes listed here, while the Global Dow and the Russell 2000 also posted gains. The Dow was unchanged on the day. Ten-year Treasury yields and crude oil prices dipped lower. The dollar advanced. Investors got mixed reports last Wednesday. The Federal Reserve released the minutes from its early November meeting and noted that it “would not hesitate to take appropriate actions to address inflation pressures.” Since that meeting, inflation has continued to rise, which could prompt the Fed to quicken the pace of tapering its bond purchasing program. On the other hand, consumer spending rose in October from a month earlier. But the biggest news was that the number of weekly claims for unemployment benefits dipped to its lowest level since 1969 (see below).

Stocks tumbled on Black Friday, the major shopping day after Thanksgiving, as investors reacted to news of another coronavirus variant identified in South Africa. Each of the benchmark indexes listed here fell by at least 2.0%, led by the Russell 2000 (-3.7%), followed by the Global Dow (-2.7%), the Dow (-2.5%), the S&P 500 (-2.3%), and the Nasdaq (-2.2%). Crude oil prices suffered one of the largest single-day plunges, dropping 13.1% to close the day at $68.15 per barrel. Ten-year Treasury yields fell to 1.48%. The dollar dipped lower. The market fallout was widespread, with each of the market sectors closing in the red. Energy (-4.0%) and financials (-3.3%) fell the furthest.

The national average retail price for regular gasoline was $3.395 per gallon on November 22, $0.004 per gallon less than the prior week’s price but $1.293 higher than a year ago. Gasoline production increased during the week ended November 19, averaging 10.1 million barrels per day. U.S. crude oil refinery inputs averaged 15.6 million barrels per day during the week ended November 19 — 243,000 barrels per day more than the previous week’s average. Refineries operated at 88.6% of their operable capacity, up from the prior week’s level of 87.9%.

Stock Market Indexes

Market/Index2020 ClosePrior WeekAs of 11/26Weekly ChangeYTD Change
DJIA30,606.4835,601.9834,899.34-1.97%14.03%
Nasdaq12,888.2816,057.4415,491.66-3.52%20.20%
S&P 5003,756.074,697.964,594.62-2.20%22.33%
Russell 20001,974.862,363.592,245.94-4.98%13.73%
Global Dow3,487.524,057.433,962.95-2.33%13.63%
Fed. Funds target rate0.00%-0.25%0.00%-0.25%0.00%-0.25%0 bps0 bps
10-year Treasuries0.91%1.58%1.48%-10 bps57 bps
US Dollar-DXY89.8496.0496.090.05%6.96%
Crude Oil-CL=F$48.52$78.76$68.15-13.47%40.46%
Gold-GC=F$1,893.10$1,861.20$1,785.50-4.07%-5.68%

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic News

  • Gross domestic product increased at an annual rate of 2.1% in the third quarter of 2021, according to the second estimate released by the Bureau of Economic Analysis (BEA). GDP expanded at an annualized rate of 6.7% in the second quarter. The deceleration in GDP in the third quarter compared to the second was significantly impacted by a slowdown in personal consumption expenditures, which rose 1.7% in the third quarter compared to 12.0% in the second quarter. A few areas that increased in third-quarter GDP included private inventory investment (11.6% vs. -3.9% second quarter) and state and local government spending (4.7% vs. 0.2% second quarter). The personal consumption price index rose 5.3% in the third quarter.
  • According to the latest data from the BEA, prices consumers spend on goods and services rose 0.6% in October and is up 5.0% over the past 12 months. Personal income increased 0.5%, while disposable personal income rose 0.3%. Consumer spending increased 1.3% in October.
  • New orders for long-lasting durable goods fell for the second consecutive month in October, dropping 0.5%, following a 0.4% dip in September. Transportation equipment continued to be a drag on new orders, falling 2.6% in October after decreasing 2.8% the previous month. Excluding transportation, new orders for durable goods actually advanced 0.5%. Excluding defense, new orders rose 0.8% in October. Some items of note include new orders for communications equipment, which rose 7.9%; motor vehicles and parts advanced 4.8%; and new orders for electrical equipment, appliances, and components increased 1.2%. On the other hand, new orders for nondefense aircraft and parts fell 14.5%, defense aircraft and parts dropped 21.8%, and defense capital goods decreased 20.1%.
  • The trade deficit for goods (excluding services) was $82.9 billion in October, down $14.1 billion, or 14.6%, from the September figure. Exports rose by $15.3 billion, or 10.7%, while imports increased $1.1 billion, or 0.5%. The jump in exports was spread across several sectors, led by industrial supplies (16.6%) and automotive vehicles (14.4%). Imports were driven higher by a 5.7% increase in automotive vehicles.
  • According to the latest survey from the National Association of Realtors®, sales of existing homes rose 0.8% in October, following a 7.0% jump in September. Nevertheless, existing home sales were 5.8% lower than the October 2020 total. Housing inventory dipped 0.8% in October, representing a 2.4-month supply at the current sales pace. The October median existing-home price was $353,900, up slightly from the $351,200 price in September. Year over year, the median existing-home price was 13.1% over the October 2020 price. Sales of existing single-family homes climbed 1.3% last month but were down 5.8% from October 2020. The median existing single-family home price was $360,800 ($357,900 in September), up 13.5% from October 2020. The inventory of existing single-family homes for sale in October represented a 2.3-month supply, unchanged from the September figure.
  • Sales of new single-family homes also rose in October, increasing 0.4% over the September rate. New home sales were 23.1% below the October 2020 pace. The median sales price of new houses sold in October was $407,700. The average sales price was $477,800. Inventory sits at a supply of 6.3 months at the current sales pace.
  • For the week ended November 20, there were 199,000 new claims for unemployment insurance, a decrease of 71,000 from the previous week’s level, which was revised up by 2,000. This is the lowest level for initial claims since November 15, 1969, when it was 197,000. While encouraging, the drop in jobless claims may be attributable to several factors. Seasonal hires for the holiday shopping season increased the number of hires. This data was released a day early to accommodate Thanksgiving and is likely to be revised next week. And, customary layoffs related to end-of-year cost cutting are being replaced by businesses retaining employees in lieu of unfilled job openings. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended November 13 was 1.5%, a decrease of 0.1 percentage point from the previous week’s revised rate. The advance number of those receiving unemployment insurance benefits during the week ended November 13 was 2,049,000, a decrease of 60,000 from the prior week’s level, which was revised up by 29,000. This is the lowest level for insured unemployment since March 14, 2020, when it was 1,770,000. For comparison, last year at this time, there were 762,000 initial claims for unemployment insurance, and the rate for unemployment claims was 4.2%. During the last week of February 2020 (pre-pandemic), there were 219,000 initial claims for unemployment insurance, and the number of those receiving unemployment insurance benefits was 1,724,000. States and territories with the highest insured unemployment rates for the week ended November 6 were the Virgin Islands (3.0%), Alaska (2.7%), the District of Columbia (2.7%), Puerto Rico (2.7%), California (2.6%), New Jersey (2.5%), Hawaii (2.1%), Nevada (2.1%), Illinois (1.9%), and New York (1.8%). The largest increases in initial claims for the week ended November 13 were in California (+4,690), Massachusetts (+2,269), Pennsylvania (+1,994), Minnesota (+1,202), and Wisconsin (+907), while the largest decreases were in Kentucky (-8,712), Tennessee (-4,001), Ohio (-3,315), Michigan (-3,230), and Illinois (-1,184).

Eye on the Week Ahead

The purchasing managers’ manufacturing and services reports for November are available this week. Respondents have noted that while the manufacturing and services sectors continue to expand, each area has been impacted by supply bottlenecks and labor shortages. Those issues are expected to remain through the year, which will further drive cost inflation. The November employment figures are also out at the end of this week. Over 500,000 new jobs were added in October, and hourly wages rose by 0.4%.