- Job creation is slowing; wages are not accelerating.
- Consumers pull back on spending.
- December new-vehicle sales disappoint despite record incentives.
Job growth is slowing, wage gains are not accelerating, and consumers are pulling back on spending as evidenced by disappointing December car sales.
Job creation slows: December saw job creation slow down relative to the much bigger gain in November. Even with the smaller gain, both the headline and the underemployment rates are now at 50-year lows. The slack in the labor market is disappearing. Slower job growth will be the norm going forward with 50-year lows in key unemployment rates.
Wages don’t gain: Wage growth is not accelerating, which prevents inflation from being a near-term worry. Some sectors like energy and manufacturing are seeing job losses.
Durable goods orders decline: Durable goods orders continue to decline, as manufacturing remains soft, but leading indicators show that the services sector continues to be strong.
Consumer spending retreats: Consumers are pulling back on credit card fueled spending, which is slowing consumer credit growth. Slowing wage growth could further dampen spending in the year ahead.
Vehicle sales decline: New vehicle sales disappointed in December and recorded year-over-year declines as both fleet and retail sales dropped despite record incentives. Retail used vehicle sales increased in December, helping to stabilize used vehicle values and return the Manheim Index to an above average y/y gain of 2.5%.
Looking ahead: This week, we will get CPI inflation numbers, retail sales and new construction data for December as well as the initial readings on consumer sentiment.