Weekly Market Update: January 9, 2017
What We Learned Last Week
Manufacturing activity is waking up. The prompt rebound in energy drilling activity in response to firming oil prices likely is a key driver.
With the labor market hovering near fully-employed levels, employment growth is slowing gradually to a more normal pace. Nonfarm payroll growth slowed to 180,000 monthly last year and that was down from 229,000 monthly in 2015. At the same time, wage growth is picking up, with average hourly earnings now rising almost three percent on a year-over-year basis.
The implications for the Fed are straightforward: the economy has no little need for emergency-level policy rates. A gradual withdrawal of monetary accommodation—with the federal funds rate eventually heading up to around three percent, the Fed’s own view—is in store.
What We Expect to See in the Week Ahead
December’s retail sales are likely to be lifted by the surge in vehicle sales to an 18.3 million unit sales rate. Internet sales probably will be the star of the holiday season’s activity.
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