A Heap of Economic Data Is on Our Plate -- And It's Lookin' Pretty Juicy

The pre-Thanksgiving economic data dump is one of my personal favorite holiday traditions. This year didn't disappoint, with important numbers on employment, consumer income, inflation and capital investment. Here are my takes on the more important news of the week. Let's dig into each item here: Powell Reappointed I'd be remiss if I didn't comment on the most important news of the week, which was the reappointment of Jerome Powell as Fed Chair. All this really does for markets is remove a bit of uncertainty, which is always good. I also personally think it helps prevent partisanship from becoming too big a part of Fed decision making, which is a long-term positive as well. There is some chatter that Powell will make a hawkish shift now that his reappointment is clinched. I don't think one has to do with the other. Powell still really wants to avoid hiking rates for as long as possible, but he's also realistic that he can't hold out forever. If that's a hawkish shift, then he's already done it. Jobless Claims Lowest Since 1969 It is interesting that Wednesday's figure of 199,000 initial claims is the lowest in absolute terms since 1969. But the reality is that the jobless claims figure is pretty random in any given week, and there might have been some oddities in the seasonal adjustment this time around. Currently the four-week average initial claims is about 1.56% of the total labor force. That same figure got as low as 1.28% at the end of 2019 before the COVID recession. Durable Goods and Capital Orders These two figures usually don't get much attention from traders, but don't underestimate their importance. The long-term bull case for the economy involves a capital expenditure boom, in which companies respond to strong demand and rising labor costs by investing in productivity-enhancing projects. Capital investment was notably lacking in the post-2008 expansion, so adding this element would make this expansion both stronger and more lasting. Both these releases look pretty good. Durable goods ex-transportation was in line with expectations at 0.5%, but the prior month was revised up by 0.2%. Capital good orders ex-aircraft beat expectations (0.6% vs. 0.5%) and the prior was revised up by 0.5 (from 0.8% to 1.3%). Meanwhile, capital goods shipments missed (0.3% vs. 0.5%). In case you forgot, there's a bit of a logistics bottleneck thing going on. Consumer Income and Spending Remember that in order for inflation to remain high, consumers must continue to spend at a level that overwhelms supply. For this to happen, consumers must have enough nominal income to maintain this level of spending. Hence why Personal Income and Personal Spending releases are of elevated importance right now. Both beat expectations on Wednesday, with income rising 0.5% (vs. 0.2% expected) and spending rising 1.3%. Employee compensation accounted for all of the jump in income, as government transfers fell to a post-COVID low. The savings rate continues to decline, but at this point is similar to pre-COVID levels. I'm not sure we can expect more meaningful spending gains that accelerate beyond income gains. From here on, we need wage growth to maintain this level of savings. Core PCE Inflation Finally, we have the Personal consumption expenditures price index inflation measure, which came in at 5.0% overall and 4.1% core year-over-Year. The overall was 0.1% below expectations and in-line on a core basis. The Fed wants to hold off on hiking rates as long as they can, but unless inflation starts to decelerate soon, they won't be able to wait much longer. If we get to March or April with no slowing, the Fed will probably start hiking. On the other hand, if inflation does show some deceleration, the Fed will seize on the whole transitory narrative. If that's how it plays out, they will tell us that the data indicates inflation is subsiding on its own, and they will wait until it levels off before hiking. For at least this month, there's no obvious deceleration. We are already hearing some Fed officials suggest accelerating tapering, and indeed that is now my expectation for the December meeting. Note that the Fed wants to be done tapering before hiking, so the primary reason for accelerating the taper is to give them the option of hiking before July.

A Heap of Economic Data Is on Our Plate -- And It's Lookin' Pretty Juicy

Let's dig into the big news and reports that were piled on just before Thanksgiving.

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