Job Market Still Healthy, Factory Orders Rise, Service Sector Strong, Pending Home Sales Fall Slightly

- Initial Jobless Claims for last week rose to 329K versus estimates of 320K and 319K the prior week.
- Continuing Claims fell to 2446K versus estimates of 2500K and 2522K prior.
- Factory Orders for November rose .9% versus estimates of a 1.3% gain and a -4.5% decline in October.
- ISM Non-Manufacturing for December fell to 57.1 versus estimates of 57.0 and 58.9 in November.
- Pending Home Sales for November fell -.5% versus estimates of a .7% increase and a -1.5% decline in October.

BOTTOM LINE: Jobless Claims came in slightly higher than estimates, while continuing claims fell more than estimates, Bloomberg reported. The four-week moving-average of jobless claims rose to 317,500 versus 316,250 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held at a very low 1.9%. Moreover, Challenger, Gray & Christmas reported today that job cuts for December plunged 49%. I continue to believe the labor market will remain healthy over the intermediate-term as service employers gain confidence in the sustainability of the current expansion, offsetting construction and auto-related cutbacks.

Orders placed with US factories rose in November, Bloomberg said. Orders for computers and electronics equipment rose 7.7% versus a 9.8% decline the prior month. Orders for construction machinery fell 20% versus a 12% decline the prior month. Orders for capital goods excluding aircraft and military equipment, a gauge of future business investment, fell 1.1% versus a 4.0% decline the prior month. The inventory-to-shipments ratio rose to 1.24 months versus 1.23 months in October. I continue to believe the worst of the manufacturing slowdown is over, but activity will remain muted as homebuilders and automakers continue to work down inventories.

Growth at US service industries slowed modestly in December after reaching a six-month high the prior month, Bloomberg reported. Readings above 50 indicate expansion in industries that comprise almost 90% of the US economy. The New Orders component fell to 54.4 versus 57.1 the prior month. The Prices Paid component rose to 59.1 versus 55.6 the prior month. The Employment component rose to 53.3 versus 51.6 in November. The average price of a gallon of gas during December was $2.32, 24% below last year’s peak of $3.04/gallon. Americans spent 26% more on the Internet in the 56 days through Dec. 26 than a year earlier, boosted by spending on electronics and books, according to ComScore Networks. I continue to believe the service sector, which accounts for the vast majority of US economic growth, will remain healthy over the intermediate-term as energy prices drop further, inflation decelerates more, interest rates remain very low, stocks continue to rise, housing stabilizes at relatively high levels and auto production cutbacks subside.

Fewer Americans signed contracts to buy previously owned homes in November, Bloomberg reported. The decline from the previous year has been narrowing over the last six months, which suggests sales are stabilizing. Pending re-sales fell 2.8% in the Northeast, 2.6% in the West and 1.1% in the South. Re-sales rose 4.8% in the Mid-west. The average 30-year mortgage rate declined to 6.14% last month, the lowest since October 2005, according to Freddie Mac. I continue to believe the housing market is stabilizing at relatively high levels.