This Week’s Economic Update, November 7, 2022

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This Friday is Veterans Day. Originally celebrated as the end of the war to end all wars, it is now a wonderful reminder of those who have served our country and protected our rights. The sacrifices our veterans have made, whether it was the time served, injuries suffered or if they made the ultimate sacrifice, they deserve our respect and recognition. If you can, find a Vet and go beyond just thanking them for their service if possible. Buy them a meal, or if they are shopping, pick up their tab. It is the least we can do to recognize their service.

Being the first week of November there was a lot of economic information that was released last week.

The ISM manufacturing report for October was released on Tuesday.  The index fell slightly from 50.9 to 50.2, essentially static.  A level at 50 is reflects a level that is neither increasing or decreasing.  Overall, there were 8 manufacturing industries that grew in October and 10 that experienced a decline in activity. The areas that declined include textile, furniture, wood, paper, metal products and computer products.  Some of these industries are not a surprise due to the decline in the housing starts.  Concrete, machinery and petroleum were areas that reflect growth.

Comments in the report are pessimistic.  Most all respondents shared information that demand is slowing, capital budgets are being cut, labor is tough to find and past orders are being canceled.  On the brighter side, most agree that the supply chain issues are alleviating. 

Within the report there are similar signs of problems.  New orders continue to contract, backlogs of orders are down, as well are export orders.  Overall, Manufacturing is flat, but the future is not looking good.

The ISM services report came in at 54.4, down from 56.7.  While the service sector is growing, the pace of the growth is slowing.  For the most part the comments were acceptable with business being tepid.  Optimistic areas remain in food service and hospitality as it appears travel is still strong.  It also appears that core services such as plumbing, electrical and related have been hit by lower construction as well as higher prices that are curbing demand.  Expect this slow leak in the service balloon to continue into 2023.

The Logistics Managers Index fell to 57.5 in October from 61.4 in September.  Transportation continues to decline due to lack of truckers as well as the high cost of fuel.  Because of the lack of available transportation as well as the supply chain catch up that has occurred, warehouses are filling up.  While you would expect prices to start abating due to the higher inventories, the lack of transport options, including moving goods down the dried up Mississippi River, will likely not impact prices until 2023.

Continuing a slide that began a couple of weeks ago, virtually all the petroleum supplies fell by wide margins this past week.  Gasoline supplies fell by 1.2 million barrels.  Crude oil was down 3.1 million barrels.  Distillate stocks, including heating oil and diesel are now down to 1951 levels. The US currently has only 25 days of diesel fuel. There are geographic areas in the US that do not have sufficient supplies of heating oil.  As the weather turns cold there will be homeowners that will not be able to get their tanks filled for any price.

The job market continues to be healthy.  New jobless claims were flat from last month.  Continuing jobless claims remain low indicating there is not a lot of supply for employers to draw on if needed.  This past week a number of tech companies did announce thousands of pending layoffs, it was not just Twitter that is cutting staff.

Manufacturing payrolls increased by 32,000 in October.  This was well above expectations as well expectations.  Government payrolls grew by 28,000 during the first month of the new fiscal year.  Overall, non-farm payroll hiring hit 233,000.  While this was down from 319,000 in September, it was still a strong showing for hiring. 

Not a good start to the month, have a great week anyway



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