- Activity contracted for the first time since May 2020, with the ISM® Manufacturing Purchasing Managers’ Index® dropping to 49.0 in November. New orders contracted for the third straight month, with exports falling for the fourth consecutive month, albeit at a slower pace of decline in November. Employment declined for the fifth time year to date, and production slowed. On the positive side, the data continued to reflect progress on supply chain challenges.
- In the Dallas Federal Reserve Bank district, manufacturers reported declining activity for the seventh straight month, with new orders falling at the fastest rate since May 2020. The sample comments noted the softening of business conditions, although some respondents cited improvements in supply chain issues while others stated that they remain challenged.
- Manufacturing employment increased by 14,000 in November. Despite some cooling in the latest data, the labor market remained a bright spot in the economy. Through the first 11 months of 2022, the sector hired 379,000 employees, building on the 365,000 workers added in calendar year 2021 and the most so far of any year since 1994. Currently, the manufacturing sector has 12,934,000 employees, the most since November 2008.
- The average hourly earnings of production and nonsupervisory workers in manufacturing rose 0.7% from $25.38 in October to $25.57 in November, up 5.5% from one year ago.
- Nonfarm payroll employment increased by 263,000 in November. The unemployment rate was unchanged at 3.7% in November, but with the labor force participation rate declining for the third straight month, edging down from 62.2% to 62.1%, the lowest level since July.
- The October report recorded 746,000 manufacturing job openings. Over the past 12 months, job openings in the sector have averaged more than 841,000, remaining well above pre-pandemic levels. Encouragingly, net hiring has averaged a solid 29,750 over the past 12 months.
- Nonfarm business job openings cooled to 10,334,000 in October. At the same time, the October report recorded 6,059,000 unemployed Americans, which translated into 58.6 unemployed workers for every 100 job openings in the U.S. economy. As such, there continued to be more job openings than people actively looking for work.
- Personal consumption expenditures rose 0.8% in October, with 7.9% growth year-over-year. Meanwhile, personal income rose 0.7% in October, the strongest monthly gain in one year. The personal saving rate edged down to 2.3% in October, the second lowest level on record, following the 2.1% rate seen in July 2005. As such, Americans have been more willing to dip into their savings this year to finance purchases.
- Wages and salaries increased 0.5% for the month, with manufacturing wages and salaries also rising 0.5% to $1,052.0 billion in October. Over the past 12 months, total wages and salaries have increased 6.7%, with manufacturing wages and salaries rising 7.8% year-over-year.
- The PCE deflator rose for the third straight month, increasing 0.3% in October, or 0.2% with food and energy prices excluded. The PCE deflator has risen 6.0% over the past 12 months, with core inflation at 5.0% year-over-year. The good news is that pricing pressures have been moderating somewhat in recent months, but costs continued to rise at solid paces.
- For its part, the Federal Reserve plans to continue its efforts to wring inflation out of the U.S. economy. Following the fourth consecutive 75-basis-point rate hike at its Nov. 1–2 meeting, the Federal Open Market Committee is likely to step down to a 50-basis-point rate increase at the conclusion of its Dec. 13–14 meeting. The Fed will likely further increase the federal funds rate by 50 or 75 basis points in total at its Jan. 31–Feb. 1 and March 21–22 meetings before hitting the pause button.
- Real GDP grew 2.9% at the annual rate in the third quarter in revised data. Strength in consumer spending on services, government, net exports and nonresidential fixed investment boosted real gross domestic product. At the same time, goods spending exerted a slightly negative effect on growth, along with notable drags from the housing market and inventory spending.
- Despite the improvement in activity in the third quarter, significant downside risks remained in the economic outlook, with the risk of a recession elevated. With that said, the current forecast is for real GDP to increase 2.0% in 2022 on an annual basis, with 1.5% growth in 2023.
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