The U.S. stock market finished the week higher amid a highlighting jobs report and dovish comments from Fed Chairman Jerome Powell. Interest rates finished the week lower due to underwhelming manufacturing data as the 10-year treasury yield dropped 8 basis points to 2.65%. The spread between the 10-year treasury yield and the 2-year treasury yield also narrowed by 4 basis points to 0.16%. Despite a better than expected jobs report, the price of gold was little changed and rose only 0.36% to $1,286.80 an ounce. The U.S. dollar index (DXY), which tends to move inversely to gold, dropped from 96.37 to 96.18. The price of crude oil jumped 6.99% to $48.24 a barrel amid a report of OPEC’s oil exports plummeting.
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This Week’s Economic Highlights
- Initial unemployment claims rose by a significant 10,000 for the week ending December 29th for a total of 231,000 initial claims. The number of continuing unemployment claims, which lags initial claims by a week, rose by 32,000 for a total of 1.74 million and remains near its 45-year low.
- The ISM manufacturing index fell to 54.1% in December from 59.3% the month prior, the slowest rate for manufacturers in two years. The largest driver in the drop of the index was an 11 point drop in new orders to 51.1%. Although any reading above 50% is considered improving manufacturing conditions, a large drop in the index could be a leading indication of weakening conditions ahead.
- The U.S. added a considerable 312,000 new jobs in December, as compared to the 182,000 expected. However, the unemployment rate increased from 3.7% to 3.9% as more people entered the workforce looking for jobs and increasing the labor force participation rate from 62.9% to 63.1%. Wage growth also increased, with the average wage rising 0.4% (11 cents) to approximately $27.48 an hour. Year-over-year wage growth has increased 3.2% from 3.1% the month prior, its highest since April of 2009.
According to the White House Council of Economic Advisors, the current government shutdown is reducing U.S. GDP by approximately 0.1% every two weeks but is expected to have little long-term impact assuming the deadlock is resolved quickly.