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12/07/2016
Market Update

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The November U.S. jobs report, widely viewed as the last hurdle for a potential interest-rate hike later this month, showed that 178,000 jobs were created in the month. The unemployment rate dropped to 4.6%, the lowest since August 2007. Despite solid employment gains, the report also showed that average hourly wage growth fell by 0.1% in November, pushing annual growth down to 2.5% from October’s 2.8%.
This Week
  • The November U.S. jobs report, widely viewed as the last hurdle for a potential interest-rate hike later this month, showed that 178,000 jobs were created in the month. The unemployment rate dropped to 4.6%, the lowest since August 2007. Despite solid employment gains, the report also showed that average hourly wage growth fell by 0.1% in November, pushing annual growth down to 2.5% from October’s 2.8%.
  • The U.S. consumer continues to drive economic momentum: third quarter gross domestic product (GDP), which measures the total value of the country’s production, grew by an annualized 3.2%, led by personal consumption. Inventory growth also slowed, which is beneficial as too much could dampen fourth-quarter production. A strong job market helped push November’s consumer confidence reading to its best level since July 2007.
  • According to the Institute for Supply Management’s manufacturing index, new orders and production both rose in November, while backlog and export orders remained nearly flat and employment inched slightly downward.
  • Construction spending advanced by 0.5% in October, driven by both single-family and multi-family residential construction; the year-over-year figure rose by 3.2%. In addition, both August’s and September’s reports were revised upward, pointing to ongoing strength in the housing market.
  • Personal income rose by a better-than-expected 0.6% in October, and September’s reading was revised upward by 0.4%. Spending also rose by 0.3% in the month (as opposed to the projected 0.5%) as consumers saved more due to higher bank rates.
  • Mortgage applications fell by 0.2% in the week ending November 25, after the previous week’s dramatic 19% jump; while refinancing, which plummeted 16% from the prior week, looked less attractive to homeowners on account of rising rates.
  • After months of negotiations, the Organization of Petroleum Exporting Countries (OPEC) reached an agreement to reduce oil production by 1.2 million barrels per day in an attempt to boost prices, contingent upon the cooperation of non-OPEC countries (especially Russia). In response, U.S. oil prices leapt more than 12% this week, their best weekly gain since 2009.
  • Producer prices in the eurozone climbed 0.8% in October, their best growth since August 2012; although year-over-year prices declined by 1.1% to minus 0.4%. Energy prices jumped by 2.6% in the month, accounting for the overall monthly growth and consumer non-durable goods saw modest growth, while capital goods remained flat. Meanwhile, November’s manufacturing purchasing managers’ index (PMI) for the region showed strength in new orders, which grew at the fastest pace since February 2014; export growth and backlog orders also did well.
  • China’s manufacturing PMI fell slightly in November but remained above a level consistent with contraction. Domestic new orders grew modestly while export orders were flat, and job losses fell to their slowest pace in 18 months. Overall, the report showed that China’s manufacturing sector has improved recently following a lag early in the year.

 

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