Here is the Report From My Mortgage-Bond Trading Service This Morning
Read It and Weep for America
ISM Services join the ISM Manufacturing in Contraction
The December ISM services index has now joined its manufacturing brethren in printing below 50. The index fell to 49.6 from 56.5 in November. Not including Covid, this is the first time we’ve seen a below 50 figure since December 2009.
New orders dropped sharply to 45.2, employment fell into contraction, and supplier deliveries eased again. Prices paid fell over 2 points.
Here is a quote from the ISM that explains the current situation - “Orders from customers are softening, and some orders are being canceled. We have lost employees due to normal attrition and are having issues backfilling positions. The supply chain is catching up to demand, and suppliers are trying to lower inventory for calendar year end and are still working through excess supply.”
Bottom line, the US economy continues to weaken and that is now spreading into services.
More Anecdotes from the December Jobs Report
Friday’s Jobs report showed a slowdown in wage growth and therefore wage pressured inflation, which the markets celebrated. It did, however, show that there were 223,000 job creations…but when sifting through the details of the report, the data is weaker than it first appears.
We already explained how all of the job gains were part time, of which 190,000 were because of “weak economic conditions”, and those that took on an extra job to make ends meet jumped 370,000.
We also mentioned that the hours worked dropped to 34.3 hours, which is the fourth straight month where we saw a decline. But if you were to attribute the drop in hours to actual jobs, it would equate to 373,000 job losses. So instead of seeing a 223,000 job gain, you would have seen a 150,000 job loss.
Overall, this report was weaker than at first glance and the lower wage pressure is exactly what the Fed wants to see, hence the rally on Friday and follow through today.
Let's Go Brandon!