Latest / Markets with Megan: A Quick Financial Markets Update / Economic Update: Signs of Weakening in Labor, Manufacturing, and Housing Markets | Episode 074 |11-16-23

Transcript

Economic Update: Signs of Weakening in Labor, Manufacturing, and Housing Markets | Episode 074 |11-16-23 · Markets with Megan: A Quick Financial Markets Update

• 0:04
  Megan Horneman: Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors.
• 0:08
  Megan Horneman: We're coming to you today with our regular segment of Markets with Megan and we're going to focus on kind of a hodgepodge of economic data that we've gotten today and unfortunately, everything we've seen today is pointed to further weakness in the economy.
• 0:21
  Megan Horneman: Some of this Fed tightening tight monetary conditions, high inflation it's starting to filter into some of the data that we haven't seen thus far.
• 0:30
  Megan Horneman: So let's dig into it.
• 0:31
  Megan Horneman: First of all, from the labor market side, we got the initial jobless claims, a surprising jump in these jobless claims.
• 0:38
  Megan Horneman: They've reached a three month high.
• 0:39
  Megan Horneman: But the bigger point to that is the continuing claims.
• 0:42
  Megan Horneman: So these are the people that are continually filing for those unemployment benefits.
• 0:46
  Megan Horneman: That rose to the highest level in two years.
• 0:50
  Megan Horneman: So there is definitely signs there that the labor market is showing signs of weakness.
• 0:54
  Megan Horneman: Now let's talk about the manufacturing side.
• 0:57
  Megan Horneman: We know manufacturing has been contracting for quite some time, but some of these levels that we got today on industrial production and also capacity utilization definitely surprised.
• 1:07
  Megan Horneman: To the downside as well.
• 1:08
  Megan Horneman: They were weaker than expected.
• 1:10
  Megan Horneman: Now, some of this has to do with the auto strike and the production in autos, but let's take that out and look at some of the other things in the capacity utilization number.
• 1:20
  Megan Horneman: So this is how much of the capacity are we using in our economy?
• 1:25
  Megan Horneman: And when that number is falling, that tends to mean we're using less of the capacity or the demand for goods is slowing.
• 1:32
  Megan Horneman: Now we saw this in the auto market, obviously because some of those plants were shut down during the strike.
• 1:37
  Megan Horneman: But there's other weakness in things like furniture, apparel, plastics, metals.
• 1:43
  Megan Horneman: These are what we consider kind of economic indicators.
• 1:47
  Megan Horneman: These are durable goods, types of items that are starting to see weakness.
• 1:51
  Megan Horneman: The last thing is completely different topic is the housing market.
• 1:55
  Megan Horneman: We got the monthly NAHB housing market index for November.
• 1:59
  Megan Horneman: What a just an ugly number.
• 2:02
  Megan Horneman: This saw a much bigger drop than was anticipated and if you go back in history, aside from the pandemic and one brief tick significantly lower in December of last year, this is the worst housing confidence that we've seen here since the great recession.
• 2:18
  Megan Horneman: And why is that?
• 2:20
  Megan Horneman: Because mortgage rates continue to be high.
• 2:22
  Megan Horneman: We have very little inventory and not a lot of people who want to move at this time.
• 2:26
  Megan Horneman: So this is causing significant strain on the housing market Perspective buyer traffic also.
• 2:33
  Megan Horneman: That's completely fallen off a cliff that's now.
• 2:36
  Megan Horneman: It's kind of the great recession types of levels if you take out the pandemic.
• 2:39
  Megan Horneman: So housing just continues to be paralyzed here in so many different areas.
• 2:44
  Megan Horneman: So just sum it up the markets, the equity markets, are down today because of the fact that the economy slowing.
• 2:49
  Megan Horneman: Bonds are rallying means yields are falling because people are anticipating the Fed will be done and actually are pulling rate cuts up earlier.
• 2:56
  Megan Horneman: We're not necessarily in that camp yet.
• 2:58
  Megan Horneman: One month is not.
• 2:59
  Megan Horneman: We're not going to say it's all clear after one month of data, but it is definitely trending in the way that we had anticipated for many, many months now.
• 3:08
  Megan Horneman: So we'll keep watching the economy.
• 3:10
  Megan Horneman: We'll see how it starts to iron itself out as we close out this year and we'll be back with more.
• 3:14
  Megan Horneman: If you have any questions or comments, please feel free to reach out to podcasts at verdence dot com.
• 3:19
  Megan Horneman: Thank you.