Personal Incomes Rise, Spending Bounces Back, Jobless Claims Rise, Chicago Manufacturing Falls, Prices Paid Declines

- Personal Income for October rose .4% versus estimates of a .5% gain and a .5% increase in September.
- Personal Spending for October rose .2% versus estimates of a .1% increase and a downwardly revised -.2% in September.
- The PCE Core for October rose .2% versus estimates of a .1% increase and a .2% gain in September.
- Initial Jobless Claims for last week rose to 357K versus estimates of 315K and 323K the prior week.
- Continuing Claims rose to 2480K versus estimates of 2440K and 2435K prior.
- The Chicago Purchasing Manager Index for November fell to 49.9 versus estimates of 54.4 and a reading of 53.5 in October.

BOTTOM LINE: Incomes rose and personal spending rebounded in the US last month, suggesting consumers may prevent the economy from slowing too much, Bloomberg said. Adjusted for inflation, spending increased the most in three months. The PCE core, the Fed’s favorite inflation gauge, rose 2.4% year-over-year, the same increase as the prior month. Adjusted for inflation, disposable income rose .3% versus a .5% gain the prior month. I continue to expect a healthy labor market will continue to propel consumer spending, while inflation continues to decelerate over the intermediate-term.

The number of US workers filing first-time applications for state unemployment benefits unexpectedly rose last week to the highest in more than a year, Bloomberg reported. The four-week moving-average rose to 325,000 from 317,750 the prior week. Jobless claims were artificially magnified this week due to the Thanksgiving holiday last week. The unemployment rate for those eligible to collect benefits, which tracks the US jobless rate, held steady at 1.9%. I expect jobless claims to trend a bit higher over the coming weeks before rebounding as auto production and housing-related cutbacks subside over the intermediate-term.

A gauge of manufacturing activity in the Chicago region unexpectedly showed a contraction in November as production and orders slowed, Bloomberg reported. This conflicts with the Chicago Fed’s Beige book comments yesterday that “manufacturing expanded at a modest pace” last month. Manufacturing now accounts for only 12% of the US economy. The new orders component of the index fell to 52 versus 54.1 the prior month. The employment component dropped to 49.4 versus 57 the prior month. The prices paid component of the index fell to 60.2 from 62.5 the prior month. I expect manufacturing to improve over the intermediate-term as auto production cutbacks subside and housing stabilizes at relatively high levels.