By: Ryan McCarroll
The U.S. labor market added a better than expected 146,000 jobs in November, contrary to fears that Super storm Sandy would slow recent gains in employment. The average monthly additions to nonfarm payrolls through 2012 have been 151 thousand per month. The jobless rate also declined during November to 7.7% from 7.9%. Unfortunately, the improvement was largely a result of a reduction in the labor force. Despite modest, but steady improvements in hiring, income growth has remained anemic. The year over year increase to average hourly earnings of 1.3% indicates the weak labor market continues to impair workers ability to negotiate higher wages.
Consumer confidence slipped in December as media coverage of the fiscal cliff has intensified. The consumer sentiment survey conducted by the University of Michigan was the lowest reading in 4 months. The increased possibility of higher taxes next year may be beginning to set in with consumers. Sentiment will be an important determinant of a willingness to spend during this holiday season.
Contrary to the negative press regarding the political theatre in Washington, continued strength in the housing recovery is garnishing more attention. New home sales, housing starts and home prices have all shown strong gains though October. Three important measures of home prices- the Case-Shiller index, the FHFA index and CoreLogic have shown year over year home price increases of 3%, 4.04%, and 6.3% respectively.
Auto sales also rebounded in November after a more modest posting in October. Total vehicle sales were a seasonally adjusted 15.5 million units- a 15.7% increase over last year. Some of the November increase is undoubtedly related to disaster replacement from the storm in the Northeast. Overall, auto demand has continued to remain a bright spot for the economy throughout the recovery.
The outcome of the political negotiations over the next three weeks will have an important impact on business spending and investment in 2013. As mentioned in last month’s commentary, the impact of the fiscal cliff may be overstated in the media. Fiscal policy is an important aspect to economic growth; however, many other factors could facilitate or retard growth in 2013, including a continued housing market recovery and the global growth outlook. Regardless of the outcome to the negotiations in Washington, an injection of clarity should provide a breath of fresh air to business leaders and perhaps spur growth in investments and hiring.