The ISM Non-Manufacturing PMI for the US increased to 55 in December of 2019 from 53.9 in November, slightly beating market forecasts of 54.5. The reading pointed to the biggest expansion in the services sector in four months as production and inventories rose faster while new orders, new export orders and employment slowed. Companies are positive about the potential resolution on tariffs and capacity constraints have eased a bit although difficulties with labour resources remain, according to Anthony Nieves, Chair of the ISM. Non Manufacturing PMI in the United States averaged 54.63 points from 1997 until 2019, reaching an all time high of 62 points in August of 1997 and a record low of 37.80 points in November of 2008.

https://tradingeconomics.com/united-states/non-manufacturing-pmi

US Jobless Claims Fall in Latest Week

The number of Americans filling for unemployment benefits decreased by 13 thousand to 222 thousand in the week ended December 21 from the previous week’s upwardly revised 235 thousand and compared with market expectations of 224 thousand.

According to unadjusted data, the largest declines were reported in Texas (-2,596), Georgia (-1,963) and New York (-1,882) while the biggest increases were observed in Missouri (+2,931), Iowa (+2,880) and New Jersey (+2,067).

The 4-week moving average was 228,000, an increase of 2,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 225,500 to 225,750.

The advance seasonally adjusted insured unemployment rate was 1.2 percent for the week ending December 14, unchanged from the previous week’s unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending December 14 was 1,719,000, a decrease of 6,000 from the previous week’s revised level. The previous week’s level was revised up 3,000 from 1,722,000 to 1,725,000. The 4-week moving average was 1,703,500, an increase of 19,250 from the previous week’s revised average. The previous week’s average was revised up by 750 from 1,683,500 to 1,684,250.

https://tradingeconomics.com/united-states/jobless-claims

Recently the State of Michigan House of Representative unanimously passed a bill that allows for a stillborn tax exemption:

The Michigan House today unanimously approved state Rep. Mary Whiteford’s legislation assisting parents of a stillborn baby through a Michigan income tax personal exemption.

“This is about what’s most important – our families, particularly those going through the very difficult time after losing a baby,” said Whiteford, of Allegan County’s Casco Township. “There is nothing we can do to take away the pain and loss for families dealing with a stillbirth. But we can acknowledge the baby, and provide some financial relief on expenses.”

There are roughly 550 to 650 stillbirths in Michigan each year, according to recent statistics. Families dealing with stillbirths often face thousands of dollars in expenses, first preparing for a baby and finally with funeral expenses.

Michigan provided a stillborn child tax credit from 2006 until broad tax changes eliminated multiple credits in 2011. Rather than a credit, Whiteford’s legislation would provide assistance through a one-time exemption for a dependent.

Whiteford noted current law allows families to claim a dependency exemption for a baby who dies after a breath or two at birth.

“Michigan families suffering through a stillbirth deserve the same acknowledgement of a lost life,” Whiteford said.

A taxpayer would need a certificate of stillbirth from the Department of Health and Human Services to qualify.

House Bill 4522, which received broad bipartisan co-sponsorship support after the vote, advances to the Senate for further consideration.

http://gophouse.org/michigan-house-unanimously-approves-rep-whitefords-plan-stillborn-tax-exemption/

In September of 2019, Kevin S. Whiteford traveled to Washington D.C. to discuss a pending legislative item on behalf of FSI. (https://financialservices.org/about/). Kevin was the only Agent/Advisor asked to speak from Cambridge Investment Research, Inc.

Kevin discussed in depth the SECURE Act with several legislators, and several months later this bill was passed. This is a significant change to America’s Retirement System, and Kevin was happy to be a part of it.

Please see the details below, and be sure to reach out with any questions.

https://www.cnbc.com/2019/12/19/congress-approves-major-changes-to-how-you-save-for-retirement.html

US GDP Growth Unrevised at 2.1% in Q3

The US economy grew by an annualized 2.1% in Q3, unchanged from the second estimate and following a 2% expansion in the previous three-month period. Consumer spending grew faster than anticipated and the drag from business investment was smaller than earlier reported. On the other hand, imports rose faster and inventories fell while investment in homebuilding was revised lower.

Personal consumption expenditures (PCE) made the biggest contribution to growth (2.12 percentage points vs 1.97 percentage points in the second estimate) and rose 3.2 percent (2.9 percent in the second estimate). It was boosted by spending on goods (5.3 percent vs 5.7 percent in the second estimate), namely durable goods (8.1 percent vs 8.3 percent), nondurables (3.9 percent vs 4.3 percent) and services (2.2 percent vs 1.7 percent). Also, federal government spending added 0.22 percentage points to growth (the same as in the second estimate) and advanced 3.3 percent (3.4 percent in the second estimate); state and local government spending added 0.08 percentage points to growth (0.06 percentage points) and rose 0.7 percent (vs 0.5 percent in the second estimate).

On the other hand, private inventories weighed on the growth (-0.03 percentage points compared to +0.17 percentage points in the second estimate). Inventories increased at a $69.4 billion pace instead of the $79.8 billion pace earlier reported.

Fixed investment was a drag on growth (-0.14 percentage points vs -0.18 percentage points in the second estimate) as it shrank 0.8 percent (vs -1 percent), mainly due to structures (-9.9 percent vs -12 percent), and equipment (-3.8 percent, the same as in the previous estimate). Business investment dropped 2.3 percent, compared to a 2.7 percent fall previously reported. In contrast, investment in intellectual property products rose (4.7 percent vs 5.1 percent) and residential one rebounded (4.6 percent compared to 5.1 percent in the previous release). Also, net external demand weighed down on growth for the second straight quarter (-0.14 percentage points vs -0.11 percentage points in the second estimate): exports rose 1 percent (vs 0.9 percent in the second estimate) and imports increased 1.8 percent (vs 1.5 percent).

The price index for gross domestic purchases increased 1.4 percent in the third quarter, compared with an increase of 2.2 percent in the second quarter. The PCE price index increased 1.5 percent, compared with an increase of 2.4 percent. Excluding food and energy prices, the PCE price index increased 2.1 percent, compared with an increase of 1.9 percent.

https://tradingeconomics.com/united-states/gdp-growth

Fed Signals No Plans to Cut in 2020

The Federal Reserve left the target range for its federal funds rate unchanged at 1.5-1.75 percent on December 11th 2019 and signaled no plans to cut in 2020. The decision came in line with market expectations. Policymakers consider the current stance of monetary policy appropriate to support sustained growth, strong labor market conditions, and inflation near the 2% target.

The central bank kept its growth forecasts unchanged for this year at 2.2 percent; 2 percent for 2020; 1.9 percent for 2021; and 1.8 percent for 2022. Inflation is seen at 1.5 percent in 2019; 1.9 percent in 2020; 2 percent in 2021; and 2 percent in 2022; all unchanged from the September projection.

Regarding the fed funds rate, most participants expect no changes in 2020 although a hike is still seen in 2021. In the September projection, more participants expected a hike in 2020.

FOMC Statement:

Information received since the Federal Open Market Committee met in October indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports remain weak. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

https://tradingeconomics.com/united-states/interest-rate

US Job Growth Hits 10-Month High

Nonfarm payrolls in the US increased by 266 thousand in November 2019, following an upwardly revised 156 thousand rise in the previous month and easily beating market expectations of 180 thousand. It was the largest advance in payrolls since January, with notable job gains occurring in health care and in professional and technical services. Employment also increased in manufacturing, reflecting the return of workers from a strike.

Health care added 45,000 jobs, following little employment change in October (+12,000). The November job gains occurred in ambulatory health care services (+34,000) and in hospitals (+10,000). Health care has added 414,000 jobs over the last 12 months.

Employment in professional and technical services increased by 31,000 in November and by 278,000 over the last 12 months.

Manufacturing employment rose by 54,000 in November, following a decline of 43,000 in the prior month. Within manufacturing, employment in motor vehicles and parts was up by 41,000 in November, reflecting the return of workers who were on strike in October.

In November, employment in leisure and hospitality continued to trend up (+45,000). The industry has added 219,000 jobs over the last 4 months.

Employment in transportation and warehousing continued on an upward trend in November (+16,000). Within the industry, job gains occurred in warehousing and storage (+8,000) and in couriers and messengers (+5,000).

Financial activities employment also continued to trend up in November (+13,000), with a gain of 7,000 in credit intermediation and related activities. Financial activities has added 116,000 jobs over the last 12 months.

Mining lost jobs in November (-7,000), largely in support activities for mining (-6,000). Mining employment is down by 19,000 since a recent peak in May.

In November, employment in retail trade was about unchanged (+2,000). Within the industry, employment rose in general merchandise stores (+22,000) and in motor vehicle and parts dealers (+8,000), while clothing and clothing accessories stores lost jobs (-18,000).

Employment in other major industries–including construction, wholesale trade, information, and government–showed little change over the month.

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $28.29. Over the last 12 months, average hourly earnings have increased by 3.1 percent. In November, average hourly earnings of private-sector production and nonsupervisory employees rose by 7 cents to $23.83.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in November. In manufacturing, the average workweek increased by 0.1 hour to 40.5 hours, while overtime decreased by 0.1 hour to 3.1 hours. The average workweek of private-sector production and nonsupervisory employees held at 33.5 hours.

https://tradingeconomics.com/united-states/non-farm-payrolls

US Retail Sales Rebound in October

US retail trade rose 0.3 percent from a month earlier in October 2019, reversing a 0.3 percent drop in September and beating market expectations of 0.2 percent.

5 of 13 major retail categories showed month-over-month increases.

Receipts at motor vehicle & parts dealers rose 0.5 percent in October (vs -1.3 percent in September) and those at gasoline stations climbed 1.1 percent (vs -0.1 percent in September) on the back of higher fuel prices. There was also a rebound in sales at food & beverage stores (0.5 percent vs -0.6 percent) and general merchandise stores (0.4 percent vs -0.4 percent), while online and mail-order retail sales increased at a faster pace (0.9 percent vs 0.2 percent).

In contrast, spending at furniture stores fell at the fastest pace since December 2018 (-0.9 percent vs 0.7 percent), and receipts at restaurants and bars dropped by the most in nearly a year (-0.3 percent vs 0.8 percent). Declines were also seen at electronics and appliance stores (-0.4 percent vs 0.1 percent), building material stores (-0.5 percent vs -1.8 percent), clothing stores (-1.0 percent vs 0.3 percent), hobby, musical instrument and book stores (-0.8 percent vs -0.1 percent), and miscellaneous store retailers (-0.6 percent vs -0.2 percent). Sales at health and personal care stores were unchanged, after a 0.6 percent growth in September.

Excluding automobiles, gasoline, building materials and food services, retail sales were 0.3 percent higher last month, recovering from the 0.1 percent decline seen a month earlier.

Year-on-year, retail sales grew 3.1 percent, compared to 4.1 percent in the previous month.

https://tradingeconomics.com/united-states/retail-sales

US Services Activity Growth Above Forecast: ISM

The ISM Non-Manufacturing PMI for the US rose to 54.7 in October 2019 from a near three-year low of 52.6 in the previous month and above market consensus of 53.5. Business activity, employment and new orders all grew at faster rates.

“The NMI® registered 54.7 percent, which is 2.1 percentage points above the September reading of 52.6 percent. This represents continued growth in the non-manufacturing sector, at a faster rate. The Non-Manufacturing Business Activity Index increased to 57 percent, 1.8 percentage points higher than the September reading of 55.2 percent, reflecting growth for the 123rd consecutive month. The New Orders Index registered 55.6 percent; 1.9 percentage points higher than the reading of 53.7 percent in September. The Employment Index increased 3.3 percentage points in October to 53.7 percent from the September reading of 50.4 percent. The Prices Index decreased 3.4 percentage points from the September reading of 60 percent to 56.6 percent, indicating that prices increased in October for the 29th consecutive month. According to the NMI®, 13 non-manufacturing industries reported growth. The non-manufacturing sector had an uptick in growth after reflecting a pullback in September. The respondents continue to be concerned about tariffs, labor resources and the geopolitical climate.”

The 13 non-manufacturing industries reporting growth in October — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Utilities; Professional, Scientific & Technical Services; Transportation & Warehousing; Real Estate, Rental & Leasing; Management of Companies & Support Services; Health Care & Social Assistance; Accommodation & Food Services; Arts, Entertainment & Recreation; Construction; Finance & Insurance; Public Administration; and Information. The five industries reporting a decrease are: Educational Services; Other Services; Retail Trade; Wholesale Trade; and Mining.

https://tradingeconomics.com/united-states/non-manufacturing-pmi

US GDP Growth Slows Less than Expected

The US economy grew by an annualized 1.9 percent in the third quarter of 2019, beating market expectations of 1.6 percent and following a 2.0 percent expansion in the previous three-month period, the advance estimate showed.

Personal consumption expenditures (PCE) rose 2.9 percent in the third quarter (vs 4.6 percent in Q2) mainly boosted by consumption of goods (5.5 percent vs 8.6 percent), in particular durable goods (7.6 percent vs 13.0 percent), and services (1.7 percent vs 2.8 percent). Federal government spending advanced 3.4 percent (vs 8.3 percent in Q2) and state and local government spending rose 1.1 percent (vs 2.7 percent in Q2). In addition, there was a rebound in both residential fixed investment (5.1 percent vs -3.0 percent) and exports (0.7 percent vs -5.7 percent).

Business investment shrank 3.0 percent, the sharpest contraction in more than 3-1/2 years, dragged by declines in spending on equipment and nonresidential structures such as mining exploration, shafts and wells. Business accumulated inventory at USD 69.0 billion pace after building stocks at a USD 69.4 billion rate in the second quarter.

Also, imports rose 1.2 percent (vs 0.0 percent in Q2) led by purchases of services (4.4 percent vs -0.7 percent).

The price index for gross domestic purchases increased 1.4 percent in the third quarter, compared with an increase of 2.2 percent in the second quarter. The PCE price index increased 1.5 percent, compared with an increase of 2.4 percent. Excluding food and energy prices, the PCE price index increased 2.2 percent, compared with an increase of 1.9 percent.

https://tradingeconomics.com/united-states/gdp-growth