Coming in hot The big report of the week was inflation – CPI, which measures the changes in the cost of a basket of goods – increased 6.8% in November compared to the prior year. This is the highest increase in prices this country has seen since 1982. This print was slightly above expectations of a 6.7% increase in prices. And the inflation was apparent across literally every category. Gas prices are up 58%, food prices are up 6%, car prices are up 31%, apparel up 5%, blah blah. Even though pay increases have increased 4.8% over the same time, obviously not even close to keeping up with the increase…

Ugh. So, we’ve gone back and forth on the jobs status the last few months – first from the delta wave, then the lack of a delta wave, and now November’s report, which was seriously far below expectations. We only added 210k jobs in November, down from the 546k we added in October, and well below expectations for 573k new jobs. Even though we missed on the job creation, we did manage to bring the unemployment rate down to 4.2%, down 0.4% from the prior month. Moral of the story: At this point, we’ve recovered all but 3.6m jobs that were lost during the pandemic. A lot of companies also…

Wrapping up earnings At this point, about 95% of S&P 500 companies have reported their financial and operating results for the third quarter. Driven by strong demand, 81% of these companies have reported results that have exceeded Wall Street’s expectations, on track to grow earnings by over 42% compared to this time last year. This week’s headlines were made by our friendly neighborhood retailers like Walmart, Target, Macy’s, Home Depot and others – all indicating consumers are healthy and ready to shop until they drop. Despite revenues (driven by consumer demand) being really strong, there’s been a big theme during this earnings season – higher costs impacting the bottom line.…

Hot, hotter, hottest The consumer price index (CPI), which measures the changes in the price of a good of baskets over time (aka inflation), increased 6.2% on an annual basis in October. This is the highest reading in the index since the end of 1990. If you exclude food and energy (two of the more volatile goods in the basket), core inflation increased at an annual rate of 4.6%, which is the highest gain since the summer of 1991. Never have I ever seen this level of inflation in my lifetime. Meanwhile, pricing for producers continues to remain elevated, up 8.6% in October, so we likely haven’t seen the end of pricing pressure…

Slacking Productivity for the third quarter came in at a really dismal -5%, which was much worse than expectations and actually the biggest quarterly drop since the summer of 1981. When you combine this with the fact that hourly labor costs increased 2.9%, the total unit labor costs increased 8.3%. This basically means that it cost 8.3% more (from a time and money perspective) to produce the exact same thing – hello inflation. Moral of the story: A big part of this productivity loss was associated with the delta wave that hit us in the third quarter. It’s largely expected that companies will be able to go back to investing money…

Growth misses We got our first read on 3rd quarter GDP this week and it came in a little weaker than expectations. The US economy grew 2% (vs expectations for a 2.8% print) with growth being slightly hampered by the slowing housing market, supply chain issues (I actually saw a Halloween costume related to this, it was hilarious), and a deceleration in consumer spending during the delta wave. The government’s COVID-related benefits also came to an end in September, decreasing the government spending component of GDP. Moral of the story: The initial expectation for 3rd quarter economic growth was much higher this summer before some of the structural issues (delta wave, broken supply chain, etc.)…

Inflation is making itself at home  The Consumer Price Index posted a 5.4% increase in September compared to the same time last year, and up 0.4% from August. Yay for at 30-year high levels and wildly higher than the Fed’s 2% average target. Excluding food and energy, core inflation came in at 4%, which has normalized a bit since hitting its high in June at 4.3%. This is coming as prices for producers increased 8.6% for the month of September, likely the highest reading for producer prices since the early 1980s. Prices are rising pretty much across every product category – supply chain bottlenecks are basically clogging up the economy…

Jobs report  We knew the delta variant was going to create some chaos in the labor market for the month of September, but economists were still expecting us to create about 500k jobs during the month. In a super unfortunate turn of events, we only created 194k new jobs in September. A big part of this was driven by government jobs declining 123k, which means private sector jobs increased by 317k. That isn’t horrible but also not a great look. The leisure and hospitality industry, which has been leading job gains through most the year was at the top of the leaderboard again, creating 74k new jobs for the month. Even though…

Market says… The Monday blues were so real this week – worries over Evergrade (more on this below) basically tipped over the first domino after which worries about a slowing economy from rising COVID cases and supply chains bottlenecks continuing to dampen productivity added to the chaos. And then China declared all cryptocurrency activity illegal, which hurt market sentiment pretty much overnight and pulled down fintech stocks with exposure to cryptocurrencies. The S&P 500 finally had its 5%+ correction moment this week but stocks managed to make up losses to end the week basically flat. Moral of the story: Volatility in the market is to be expected for a while…

Unexpected The August retail sales report was a pleasant surprise after consumer sentiment readings in August seemed to have hit rock-bottom given the new wave of COVID cases. Retail sales increased 0.7% in August (up 15.1% from August last year), while expectations were for a 0.8% decline. If you exclude autos (car sales have been under pressure not from a lack of demand, but just a total lack of supply), retail sales actually increased 1.8% from the prior month.  Moral of the story: Sales were strong across most categories the impact of the delta variant did come through across bars and restaurants, where sales were flat compared to the prior…