State of manufacturing
This was a fairly light week of economic updates (plus a holiday week, though it somehow felt like it lasted for ever), but we got a few regional manufacturing updates from the Philly and New York feds. In an unfortunate turn of events, the New York manufacturing survey plummeted into negative territory for the first time in 20 months. The Philly survey, however, continued to show improvement despite the omicron wave, indicating that some parts of the country will be faring better than others.
Moral of the story: NY got hit hard and fast and first by the Omicron wave, which pretty much wiped out a large part of the labor force – with that many workers calling in sick, unfortunately productivity takes a bit of a hit. But it’s expected to be temporary as cases as peaking and falling in some of the earliest-hit areas. The thing that is not going away anytime soon, according to these surveys, is inflation. Businesses continue to face cost pressures for materials and labor.
**Ignore**
New unemployment claims jumped to a three-month high of 286k last week as a side-effect of the omicron. The government calculates these numbers on a seasonally adjusted basis – but the jobs situation during the pandemic has obviously not followed any sort of normal seasonality, making seasonally-adjusted numbers a little unreliable.
Moral of the story: If you remove the impact of seasonality, the new unemployment claims actually decreased last week **face palm** so you can see why I don’t quite want to make any great assumptions about the state of the labor market based on this information. The labor market is showing a lot of strength, we’re seeing good wage growth, the omicron wave is hopefully but a blip this month in an otherwise solid recovery story.
Earnings season continues
Earnings season continued this week as tech stocks had their worst week since March 2020 (aka the first week of chaos in the market because of COVID) and fell a whopping 7.6%, marking the fourth straight weekly fall for these stocks. Shares of Peloton slid hard on reports that they were cutting back production on slowing demand. Shares of Netflix slid (despite strong results) on lower than expected subscriber growth. And then markets took that to mean a pattern – all tech bad.
Moral of the story: We’re going to hear from other big tech companies like IBM, Microsoft, and Intel this coming week as earnings season continues – hopefully results and sentiment improve from here. In the meanwhile, a lot of really strong, high-quality technology names are on sale and I’m excited to go shopping.