Job Market Healthy, Consumer Confidence Surges Near Cycle Highs, Chicago Purchasing Manager Improves, Existing Home Sales Rise Again

- Initial Jobless Claims for last week rose to 317K versus estimates of 320K and 316K the prior week.
- Continuing Claims rose to 2530K versus estimates of 2500K and 2514K prior.
- Consumer Confidence for December rose to 109.0 versus estimates of 102.0 and a reading of 105.3 in November.
- Chicago Purchasing Manager for December rose to 52.4 versus estimates of 50.0 and a reading of 49.9 in November.
- Existing Home Sales for November rose to 6.28M versus estimates of 6.19M and 6.24M in October.

BOTTOM LINE: US initial jobless claims and continuing claims edged up last week, Bloomberg reported. The four-week moving average of claims fell to 315,750, the lowest in six weeks. The unemployment rate among those eligible for jobless benefits, which tracks the US jobless rate, held steady at a low 1.9%. Despite housing and auto production-related job cutbacks, the US job market remains very healthy as other areas are picking up the slack. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Confidence among US consumers unexpectedly surged this month to the highest level since April, reflecting recent job and stock gains, Bloomberg reported. The Present Situation Component of the index rose to 129.9, the highest since July, versus 125.4 the prior month. The Expectations Component for the next six months increased to 95.1, the highest since June, versus 91.9 the prior month. The Jobs Are Plentiful component rose to 26.9% versus 25.7% the prior month. The percentage of people who expect their incomes to decrease fell to 7% from 9.1% the prior month and to the lowest since 2001. The overall surge in the index was mainly due to a 15.6% jump in Central Northeast sentiment. Overall, Consumer Confidence has only been higher one other month this cycle. In April it hit 109.8. I continue to believe new cycle highs in confidence will occur over the coming months as energy prices fall further, interest rates remain low, inflation decelerates more, the job market remains healthy, stocks rise further, housing stabilizes at relatively high levels and irrational pessimism lifts.

A gauge of US business activity rebounded from the first contraction in more than three years as orders and production increased, Bloomberg said. The production component rose to 56.2 versus 54.4 the prior month. The new orders component rose to 57.8 versus 52.0 the prior month. The prices paid index was unch. at 60.2. Manufacturing will likely remain muted until the second half of next year.

Sales of previously owned homes unexpectedly rose in November, adding to evidence the housing slowdown is ending, Bloomberg reported. The supply of previously owned homes for sale at the current pace fell to 7.3 months’ from 7.4 months supply in October. The median price of an existing home fell 3.1% to $218,000. I continue to believe the US housing market is stabilizing at relatively high levels.