Economic Update 02/08/16

UNEMPLOYMENT NOW BELOW 5%

Although the economy added just 151,000 jobs in January, the Labor Department’s latest employment report also showed a reduction in the headline jobless rate to 4.9%. The broader U-6 measure of underemployment remained at 9.9%. Monthly payroll gains have averaged 231,000 since November; in fact, the 3-month, 6-month, and 12-month job creation averages are now all above 200,000.

CONSUMER SPENDING FLATTENED IN DECEMBER

Personal incomes rose 0.3% in the final month of 2015, but the Commerce Department recorded no corresponding personal spending advance. The good news? The personal savings rate reached 5.5%, a 3-year high.

MANUFACTURING SLOWDOWN CONTINUES

The Institute for Supply Management’s purchasing manager index for the factory sector came in at 48.2 for January, 0.2 points higher than the previous reading, but still well under the 50 mark. U.S. manufacturing has now contracted for four straight months. ISM’s non-manufacturing PMI dipped 2.3 points in January, but still showed expansion at 53.5.

OIL PRICES & STOCK INDICES DECLINE

Oil closed Friday at $30.89 on the NYMEX, down 8.1% in five days. That and earnings disappointments lead to sizable weekly descents: the Dow lost 1.59% to 16,204.83; the Nasdaq, 5.44% to 4,363.14; the S&P 500, 3.10% to 1,880.02.

THIS WEEK: Hasbro, Lennox International, Loews, 21st Century Fox, and Yelp announce earnings Monday. Tuesday, earnings news arrives from Akamai, Baidu, Coca-Cola, CVS Health, Goodyear, Ingersoll-Rand, Martin Marietta, NCR, Panera, Spirit Airlines, Viacom, Walt Disney Co., WellCare, Wendy’s, Western Union, and Wyndham Worldwide. Federal Reserve chair Janet Yellen begins two days of testimony on monetary policy in Congress Wednesday; investors will keep an eye on that and earnings from Aramark, Cisco, Expedia, Humana, iRobot, LifeLock, LoJack, O’Reilly Automotive, Omega Healthcare, Owens Corning, Tesla Motors, Time Warner, Twitter, Whole Foods, and Zynga. Thursday brings earnings from Activision Blizzard, Avon, Coca-Cola Enterprises, Diebold, Groupon, Huntsman, Invacare, Kellogg, Molson Coors, Pandora, Peabody Energy, Penske, PepsiCo, TripAdvisor, Verisign, Vonage, and W.R. Grace, in addition to initial claims figures. Friday, the University of Michigan’s initial February consumer sentiment index appears, plus January retail sales figures and earnings from ITT and Red Robin.