Posted by Joseph Y. Calhoun, III

The economic data this week has been generally positive. The economic recovery, as deficit financed and temporary spending induced as it is, seems to be accelerating.

ISM Manufacturing Index: The ISM manufacturing index was a little less than expected but still above the 50 level that indicates expansion. The New Orders index moved back above the 60 level and is indicating very strong future growth. Employment fell but stayed above 50. The ISM is a very good coincident indicator for the economy and the stock market so continued readings over 50 are very positive.

Construction spending: Construction spending was flat on the month which was better than the expected decline of 0.4%. Residential spending is rising while non residential and public spending are contracting. Nothing surprising about any of that.

Pending Home Sales: Pending home sales which are based on contract signings rose again in October. There was probably some boost from the home buyer’s tax credit but pending sales are up 31% over the last year. The housing market is coming off the bottom, but it remains to be seen whether the market can sustain upward momentum when the tax credit expires in the spring.

Challenger Job Cuts Report: The Challenger job cuts report, which counts corporate layoff announcements, fell to 50349 for the week. That’s down from 181671 a year ago so layoffs have definitely eased. Not much in the way of hiring intentions though.

Jobless Claims: New claims fell 5000 to 457000 which continues the positive trend. I have said previously that when claims fell below 500,000 we would start to see some job growth. That may be true (see the non farm payrolls report) but to see robust job growth, claims will need to keep falling to below 350,000.

ISM Non Manufacturing Index: Not nearly as positive as the manufacturing version released earlier in the week. The overall index fell to 48.7 from 50.6 the previous month. The new orders index was positive at 55.1 but the employment index was only 41.6. A very mixed report.

Non Farm Payrolls: Payrolls fell by 11,000 jobs while the unemployment rate fell to 10% (gosh it feels odd to write “fell to 10%”). There were significant upward to revisions to the last two months data. Obviously, this report was much better than expected and indicates that my prediction concerning claims may be valid. Most economists were pointing to job growth when claims fell to 400,000 but I chose the higher number because it correlated better with previous deep recession like the 81-82 recession. When unemployment gets this high there is a lot of churn in the jobs market and growth can start with higher levels of claims. The household survey showed a gain of 227,000 employed and a drop of 325000 in unemployed. The difference is the change in the labor force which fell by 98000. Job gains were in the service and government sectors. Goods producing jobs fell. Average workweek rose to 33.2 hours while overtime rose 0.1 hours to 3.4. By the way the biggest drop in unemployment rate was among teenagers which have been hit particularly hard in this recession (probably due to the rise in the minimum wage). The rate is still extreme at 26.7% but that is a drop of 0.9 from last month.