In contrast to much of the developed world, U.S. economic data continues to demonstrate strength. The National Federation of Independent Business Optimism Index came in at 98.1. This was two points higher than both the prior report and the Street consensus estimate. Most encouraging was that 15% of respondents said they planned on raising wages. That is up two points from the prior 2014 high and the best level since early 2008. William Dunkelberg, the NFIB’s chief economist, said in a statement:
“The reported gains in compensation are still in the range typical of an economy with reasonable growth. Labor market conditions are suggestive of a tightening, which will put further upward pressure on compensation.”
Although wages are starting at a lower base than in previous recoveries, it is good to see some wage pressures. However (as the bond market indicates), wage pressures will probably not be strong enough to cause inflation pressures to increase. Still, would you rather be like Europe or Japan? This was the strongest NFIB reading since February 2007.
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JOLTS job opening data indicate that the number of job openings increased in October to 4,834,000 from a prior revised 4,685,000 (down from 4,735,000). Although (with revisions), job openings rose moderately (and might have been helped by holiday hiring), the U.S.labor market is improving. It might not feel like it for many workers as wage pressures are modest to moderate, but when viewed globally, the U.S. labor market is in pretty good shape.
October Wholesale Inventories rose 0.4%, unchanged from a prior revised 0.4% (up from 0.3%). October Wholesale Trade Sales rose 0.2% versus a prior revised 0.0% (down from 0.2%) in September. There were two particularly encouraging data points in today’s reports. Ex-Oil, Wholesale Inventories rose 0.5%. This indicates much business optimism heading into the holidays. Also, Wholesale Trade Sales ex-autos rise 0.3%. This means it is more than just the cheap loan-fueled auto sector which is driving sales. Today’s data bode well for a strengthening economic core.
The IBD/TIPP Economic Optimism Index jumped to 48.4 from a prior 46.4 and was higher than the Street consensus of 47.0. Readings below 50 indicate overall pessimism. The Personal Finances component rose slightly to 56.4 from a prior 56.2 (decidedly optimistic). The Federal Policies component rose to 40.2 from a prior 37.8. Although this was a significant improvement, sentiment regarding fiscal policies remain decidedly negative. One has to wonder where the economy would be with better fiscal policies.
By Thomas Byrne – Director of Fixed Income – Investment Consultant
Thomas Byrne brings 26 years of financial services experience to Wealth Strategies & Management LLC. He spent the last 23 years as Director of Taxable Fixed Income for Citigroup, Inc. and predecessor firms in New York, NY. During the course of his long fixed income career, Mr. Byrne was responsible for trading preferred stock, corporate bonds, mortgage backed securities, government debt, international debt and convertible bonds. Mr. Byrne was also responsible for marketing, sales, strategy and market commentary within the taxable fixed income markets.
- November 2012 – Present, Wealth Strategies & Management LLC, Stroudsburg PA
- December 2011 – November 2012 – Bond Squad, Kunkletown, PA
- April 1988 – December 2011, Citigroup and predecessor firms, New York, NY
- June 1986 – March 1988 – E.F. Hutton, New York, NY
Director of Fixed Income
Wealth Strategies & Management LLC