Note: Travelling week.

US Job Openings Pick Up to 7.7 Million as Labor Demand Steadies Quits rose and layoffs eased, also showing stabilization

US job openings picked up in October while layoffs eased, suggesting demand for workers is stabilizing.

Available positions increased to 7.74 million from a revised 7.37 million reading in September, the Bureau of Labor Statistics Job Openings and Labor Turnover Survey, known as JOLTS, showed Tuesday. The median estimate in a Bloomberg survey of economists called for 7.52 million openings.

The advance in openings was led nearly entirely by professional and business services and accommodation and food services.

The overall uptick followed months of steep declines — including a big drop in September. The levels of layoffs decreased to the lowest since June, while quits picked up to the highest since May, indicating workers are more confident in their ability to find a new job.

While companies like Boeing Co., General Motors Co. and Cargill Inc. have either recently cut jobs or announced plans to do so, there are few signs of a broad pickup in layoffs. (…)

The number of vacancies per unemployed worker, a ratio the Fed watches closely, was little changed at 1.1, in line with pre-pandemic levels. At its peak in 2022, the ratio was 2 to 1.

Friday brings the November jobs report, the final major labor-market update before the Federal Reserve’s Dec. 17-18 meeting.

October’s job openings rose 372,000 to 7.74 million (chart). While hires fell by 269,000, layoffs decreased 169,000 and quits increased by 228,000. Bad weather, labor strikes, and uncertainty regarding the US elections probably depressed hiring in October. Still, the labor market’s broad resilience in the face of those pressures is significant. More workers quitting their jobs suggests they are confident about their ability to earn higher wages elsewhere. The animal spirits unleashed by Trump 2.0 should boost hiring during the final three months of this year and well into next year, in our opinion. (Ed Yardeni)

Indeed Job Postings stabilized during the summer but seems back on its downtrend (through Nov. 29):

CONSUMER WATCH

Santa’s got a brand-new bag, or two. U.S. consumers did what they do best over the long weekend, shelling out a record $10.8 billion on Black Friday according to Adobe Analytics, up a brisk 8.2% year-over-year.  Spending on so-called Cyber Monday rose more than 13% to $13.3 billion, while total holiday season expenditures will reach $240.8 billion if Adobe’s forecasts are on point, representing an 8.4% uptick from 2023.

Largely stable household debt levels further color those impressive growth rates, with the total tab rising a modest 3.8% year-over-year in the third quarter per Moody’s, trailing the 4.9% and 4% expansions in nominal GDP and nonfarm wages, respectively, over the same period.  Credit card balances rose at an 8.1% annual clip to a record $1.17 trillion, though Bloomberg notes that such borrowings as a share of income stand at 8%, in line with the pre-pandemic ratio. (Almost Daily Grant’s)

China Services Activity Gauge Signals Continued Growth, Optimism The Caixin services purchasing managers index came in at 51.5 in November, edging down from 52.0 in October

(…) Both supply and demand in the sector continued to grow, but at a marginally slower pace, according to Caixin. Business activity and total new orders followed suit, while overseas demand growth decelerated for a second straight month, the data indicated.

Employment in the services sector grew for a third consecutive month in November, but was limited despite continued increases in total new orders.

As Beijing’s more aggressive stimulus efforts start to kick in, sentiment among service providers has improved markedly, with the gauge for future expectations rising for a second month. (…)

Wednesday’s readings are in line with the official gauge released previously. China’s official nonmanufacturing PMI, which covers both service and construction activity, fell to 50.0 in November from 50.2 in October. The subindex tracking service activity stayed unchanged at 50.1, suggesting continued expansion.

Both the official and Caixin PMI readings for the manufacturing sector came in stronger in November, pointing to a solid burst of activity, which may have been aided in part by the front-loading of shipments ahead of potential U.S. tariffs. (…)

  

• The new business index fell to 51.8 in November (52.1 in October) and the outstanding business index edged down to 50.5 in November (50.7).
• The new export orders sub-index moderated slightly to 52.7 in November (52.9 ).
• The employment sub-index remained unchanged at 50.2 in November.
• Price indicators suggest inflationary pressures eased in November. The input prices sub-index fell to 50.1, the lowest level since July 2020 (52.1 in October).
• The output prices sub-index fell to 49.6 (50.0) on lower cost inflation and heightening competitions.

Eurozone economy slips back into contraction in November

After recovering slightly to register 50.0 in October, the seasonally adjusted HCOB Eurozone Composite PMI Output Index fell back into contraction territory during November. At 48.3, the headline index signalled a renewed downturn in private sector business activity across the eurozone. Moreover, albeit only modest, the decrease in output was the fastest for ten months.

Central to November’s drop in activity levels was the service sector, which posted its first decline in output since the beginning of the year. Factory production volumes fell for a twentieth successive month, the longest sequence of contraction in the survey history.

The eurozone’s big-three economies of Germany, France and Italy all registered contractions in business activity midway through the final quarter of 2024. The other euro area nations which have Composite PMI available – Ireland and Spain – posted expansions, with the former registering the strongest growth in output for two-and-a-half years.

Economic activity levels were stifled by a sustained reduction in demand for goods and services, latest data showed. For a sixth month running, intakes of new work shrank across the eurozone in November. Additionally, the pace of decline was the steepest in the year-to-date.

Both manufacturers and service providers reported lower volumes of new business, although factory sales fell by a considerably stronger margin. Export performance was a heavy drag on the euro area economy, with new orders from non-domestic customers falling at a faster pace than that of total sales.

With demand trending lower, the onus on backlogs as a means to sustain activity levels increased. Subsequently, outstanding order volumes decreased in November. This marked the twentieth month in succession that work-in-hand has fallen. The rate of backlog depletion was broadly level with those seen in both October and September, and therefore among the fastest in 2024 so far.

Regarding jobs, the latest HCOB survey data revealed further cutbacks by firms in the eurozone. The reduction in staffing levels was only marginal, but nevertheless the second-fastest since December 2020 (behind October). The decline in employment was driven entirely by manufacturers, as the pace of job creation ticked higher in the service sector.

When looking towards the next 12 months, eurozone companies registered positive expectations on balance. However, the degree of optimism waned to its lowest in a year and was much weaker than its long-term average.

Lastly, November saw inflationary pressures creep up across the euro area. For a second successive month, rates of increase in both input costs and output prices accelerated and were at their most marked since August. That said, price increases were seen only in the service sector, while goods producers registered cost reductions and discounts to their own prices.

The HCOB Eurozone Services PMI Business Activity Index posted below the 50.0 no-change mark for the first time since January in November. Falling to 49.5, from 51.6 in October, the index signalled the first decrease in service sector output for ten months. However, the contraction was only marginal overall.

Demand for eurozone services weakened for a third straight month in November. Furthermore, the decline was the quickest since January. New business from non-domestic sources provided a sharper drag on total orders, with the respective HCOB index at a 13-month low.

Services employment continued to rise across the eurozone, however, sustaining a run of job creation that stretches back almost four years. This was despite backlogs of work falling for a seventh straight month, suggesting service providers have spare capacity.

Meanwhile, confidence levels weakened in November. Expectations for growth were at their softest since September 2023.

Turning to prices, the latest survey data showed an uplift in pressures as both input cost and output charges increased at faster rates than in the previous month. Compared to their respective pre-pandemic trends, inflation rates were elevated in both cases.

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Stagflation is a pretty nasty word, especially if you are a central banker, but that is what is hitting the eurozone right now. In November, the economy started shrinking while the PMI price components went up for the second month in a row. Inflation is mainly driven by services, but with the euro getting weaker, there is a risk that the prices of imported goods might start climbing too in the coming months.

“The European Central Bank (ECB) is in a tough spot. The economy is struggling and really needs some monetary support. However, inflation is stubbornly high, as highlighted by significant wage increases in the third quarter. So, the ECB is likely to avoid aggressive rate cuts and instead might carefully lower rates by 25 basis points on December 12.

“The services sector, which had been holding up the overall economy, is now shrinking for the first time since January. This is bad news for overall growth prospects, especially since this weakness is seen across the top-three euro economies. This broad-based decline might be due to consumer uncertainty, fuelled by political issues in France and Germany and the threat of trade wars linked to Donald Trump’s election in the US. Our GDP nowcast, which includes PMI data among other indicators, predicts stagnation in the final quarter of 2024.

“An early recovery in the services sector doesn’t seem likely, as new business has dropped for the third consecutive month. Although employment saw a slight uptick in November after nearly stagnating the previous month, this shouldn’t be seen as a sign of recovery. Most other indicators suggest more challenging times ahead.”

Note: Travelling week

MANUFACTURING PMIs

S&P Global: Employment rises amid improved business confidence

The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI^®) remained below the 50.0 no-change mark in November, but at 49.7 pointed to only a marginal worsening in the health of the sector during the month. The reading was up from 48.5 in October and the highest in the current five-month sequence of deteriorating business conditions.

Central to the near-stabilization of the sector in November was a much slower reduction in new orders, which decreased only marginally and at the slowest pace in five months. Some manufacturers indicated that domestic demand conditions had started to improve following the results of the Presidential Election.

On the other hand, new export orders decreased at a sharper pace. The rate of contraction was the fastest since June 2023 as international demand worsened.

Although the pace of reduction in total new orders eased, a further fall in new business contributed to another drop in manufacturing production, the fourth in as many months. Hurricane disruption, price increases and a partial hangover from pre-election uncertainty were also mentioned as factors leading production to fall. The pace of decline quickened from that seen in October.

While production decreased, there was a marked improvement in the outlook for output over the coming year. November saw business sentiment rise to the joint-highest in just over two-and-a-half years as almost half of respondents predicted growth.

Firms commented on hopes that the incoming administration will help strengthen the business environment, while improved economic conditions, new order growth and capacity enhancements were also factors supporting the positive outlook.

Growing confidence encouraged manufacturers to expand their workforce numbers in November, thereby ending a three-month run of job cuts.

The increase in staffing levels at a time when new orders were continuing to fall meant that firms were able to reduce their backlogs of work again midway through the final quarter of the year. Moreover, the rate of depletion in outstanding business was the fastest in 16 months. Meanwhile, stocks of finished goods increased for the fifth month running.

Purchasing activity and stocks of inputs decreased again in November. However, as was the case with new orders, both rates of decline eased and were only slight. Some firms started to purchase additional inputs in response to positive output expectations, while others did so in an effort to get ahead of the potential imposition of tariffs.

One in four companies reporting higher input purchases in November attributed the rise to tariff threats, underlying US manufacturers’ concerns over the inflationary impact of tariffs.

Manufacturers recorded a slower rise in input costs in November, and one that was only modest. The pace of input price inflation eased for the third month running to the weakest for a year.

On the other hand, the pace of output price inflation quickened slightly and remained slightly above the pre-pandemic average.

Finally, suppliers’ delivery times lengthened for the second successive month. The modest lengthening of lead times was nonetheless the most pronounced since October 2022. Respondents indicated that delivery delays reflected labor shortages at suppliers and issues with transportation logistics.

• ISM: A Five-Month High is Still Rather Low

The 48.4 print for the November ISM marks the highest reading since June but is still below the breakeven line of 50. In an era in which firms are prioritizing spending on intellectual property assets rather than equipment and physical products, manufacturing continues to struggle.

Of the five sub-components that feed into the headline, only new orders was in expansion territory in November coming in at 50.4. While this is only just above 50, it marks a jump of a little more than three points from the prior month. (…)

Whether this move in November is a reflection of stocking up in worried anticipation of tariffs or just an organic demand-driven increase remains to be seen. Note that inventories shot up 5.5 points, the largest monthly gain in today’s report, though the 48.1 reading is not yet indicative of a broadly based stockpiling effort. (…)

Canada: November sees strongest growth of manufacturing sector since early 2023

The seasonally adjusted S&P Global Canada Manufacturing Purchasing Managers’ Index™ (PMI^®) remained above the crucial 50.0 no-change mark for a third successive month in November. With the PMI improving to 52.0, from 51.1 in October, the rate of growth also improved to its highest since February 2023.

Underpinning the PMI in November were firmer gains in both production and new orders. For output, the increase was the best in two-and-a-half years, whilst growth in new work was the steepest for 21 months.

Panellists reported that market activity was generally better, linked in part to recent reductions in interest rates. Growth was however centred on the domestic market as new export orders declined for a fifteenth successive month. Panellists reported that global manufacturing demand remained subdued. (…)

On the price front, input cost inflation picked up since October, hitting its highest level for over a year-and-a-half. There were reports that the stronger US dollar had raised the cost of imported goods, whilst panellists specifically noted higher livestock and lumber prices. In response, firms increased their output charges, with inflation hitting a three-month high albeit to a level that remained well below its historical average.

Finally, panellists are confident of a further rise in output from present levels in 12 months’ time. There are hopes that the improvement in demand and underlying market activity will be sustained. That said, optimism edged lower in November, dropping slightly to reach its lowest since July.

U.S. manufacturers’ mood improved post elections but actual demand has yet to show strength. Canadian new export orders fell again and Mexican manufacturers “commonly reported weaker demand from the US” per S&P Global’s survey.

Whatever tariffs front running there is, it only accrues to foreign producers, mainly Chinese. From yesterday’s China manufacturing PMI:

Incoming new orders placed with Chinese manufacturers increased amongst the fastest rate in three-and-a-half years. A renewed rise in export orders also supported the rise in overall new orders.Panellists revealed that better underlying demand conditions, new product launches and stockpiling following the US election were amongst the reasons for the rise in new work.

China Targets Critical Metals in Tit-for-Tat Response to US Beijing bans exports of germanium, gallium to American market

Gallium, germanium, antimony and superhard materials are no longer allowed to be shipped to America, the Ministry of Commerce said in a statement Tuesday. Beijing will also place tighter controls on sales of graphite, it added.

“The US has generalized the concept of national security, and politicized and weaponized economic, trade and tech issues,” a ministry spokesperson said in a separate statement. “It has abused export control measures and unreasonably restricted certain products’ export to China.”

On Monday, the White House slapped fresh curbs on the sale of high-bandwidth memory chips made by US and foreign companies to China. That was the latest salvo in an intensifying campaign to contain Beijing’s technological ambitions.

China’s response targets metals used in everything from semiconductors to satellites and night-vision goggles. A Chinese export ban on gallium and germanium would deliver a $3.4 billion hit to the US economy, the US Geological Survey said in a report last month. (…)

“It’s a clear signal that China is preparing to strike back more forcefully against US economic pressure than it has in the past few years.” (…)

There were zero exports of gallium and germanium to the US this year, which suggests that American industries were drawing on inventories or procuring the metal from other sources. The US accounted for only about a 10th of all China’s antimony exports.

Separately on Tuesday, three Chinese industry associations — representing the internet, semiconductor and auto sectors — urged Chinese companies to choose carefully when buying chips from US.

Fourth-Quarter GDP Growth Estimate Increased

On December 2, the GDPNow model estimate for real GDP growth in the fourth quarter of 2024 is 3.2 percent, up from 2.7 percent on November 27.

Construction Industry Braces for One-Two Punch: Tariffs and Deportations Trump’s immigration and trade policies put home builders in a vulnerable position

(…) McKinney, like the country’s other fastest-growing cities, is a town built by imported labor and home to an industry hooked on imported steel and lumber.

That leaves the construction industry particularly vulnerable to President-elect Donald Trump’s vow to deport millions of undocumented immigrants, and his threats to introduce new tariffs on Mexico and Canada.  

“We will absolutely have a labor shortage,” said George Fuller, a longtime Texas developer who is also mayor of McKinney. “Whether you want to acknowledge it or not, these industries depend on immigrant labor.” (…)

“The short-term impact, I don’t want to say devastating, but it would be a significant impact,” he said.

In Texas, California, New Jersey and the District of Columbia, immigrants make up more than half of construction trade workers, according to Riordan Frost, a senior research analyst at the Harvard Joint Center for Housing Studies. Undocumented workers make up an estimated 13% of the construction industry—more than twice that of the overall workforce, according to a recent estimate from Pew Research Center. (…)

Overall, about 7.3% of home-building materials are imported, according to the National Association of Home Builders. Softwood lumber, used to frame buildings, often comes from Canada, which now has a tariff of 14.54%. The U.S. is also the world’s top importer of the crucial housing materials iron and steel. About a quarter of America’s $43 billion in imported iron and steel came from Canada as of 2022, according to the Observatory of Economic Complexity.

Another key home-builder import from both Mexico and Canada is cement. The U.S. imported $512 million of cement from Canada and $254 million from Mexico in 2022. Gypsum, which is used to make drywall, is also imported from both countries and has already jumped nearly 50% in price since 2020, NAHB said. (…)

Michael Bellaman, president and chief executive of Associated Builders and Contractors, which endorsed Trump, said “enthusiasm is very high” because of the prospect of deregulation under the president-elect. Federal and local government regulations add more than $90,000 to the cost of a new home, according to NAHB. (…)

After more than 300,000 undocumented immigrants were deported between 2008 and 2013, Americans didn’t replace all the construction positions they previously held, according to a study by the universities of Utah and Wisconsin this year. It found the deportations caused a resulting loss of about a year’s worth of construction for the average county and raised new home prices roughly 20%. (…)

Since 2022, some 130,000 newly arrived immigrants have joined the construction industry, pushing the number of foreign-born construction workers to a record, according to the NAHB. (…)

Even with the surge in migration, roughly half of builders reported shortages earlier this year for directly employed workers and for subcontractors, according to the association’s survey of electricians, roofers, plumbers, painters and businesses in several other trades. (…)

SENTIMENT WATCH

Wall Street Short Sellers Throwing In the Towel, Citigroup Says S&P 500 futures positioning ‘completely one-sided’: Citi

Short-sellers are capitulating as the S&P 500 Index keeps hitting record highs and is set for its best year since 2021, according to Citigroup Inc. strategists.

Investor positioning in S&P 500 futures is “completely one-sided,” the strategists led by Chris Montagu wrote in a note. It’s “setting new highs for a fourth consecutive week and increasingly the hold-out shorts are capitulating,” they said.