- The U.S. added 199,000 jobs in December
- The ISM Manufacturing Index registered 58.7 in December, while the ISM Services Index was 62.0
- The yield on the 10-year Treasury note rose to 1.77% last week
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Top Three Market Headlines
Jobs Report Disappoints Again: The Labor Department reported last week that U.S. nonfarm payrolls grew by only 199,000 in December, falling well short of analysts' estimates of more than 400,000. The number of job gains for November was revised upward, but remained limited at 249,000. Despite the low number of additions, the unemployment rate fell to 3.9% in December from 4.2%. Some economists attribute the disappointing job gain numbers to the difficulty businesses are facing in filling positions as labor supply remains tight. These conditions are driving up labor costs, as average hourly earnings increased in December by 4.7% from the prior year.
Business Activity Slowed in December: U.S. economic activity continued expanding in December, but at a cooler pace compared to the prior month, according to monthly surveys of business executives conducted by The Institute of Supply Management (ISM). The ISM Manufacturing Index fell to 58.7 in December, down from 61.1 in November, while the ISM Services Index registered 62.0, down 7.1 points from its all-time high in November. (A reading above 50 indicates an expansion of activity, while a sub-50 mark reflects contraction.) Respondents to both surveys cited continued supply chain pressures and rising costs for materials as drivers of the lessened activity.
Fed Minutes Reflect Consideration of Tighter Policy: Minutes released last week of the Federal Reserve's latest meeting in December revealed that Fed officials discussed raising interest rates sooner than previously anticipated in response to inflation and the tight labor market. In addition, officials discussed beginning to decrease the Fed's portfolio of bonds and other assets shortly after raising rates. The Fed is presently "tapering" its monthly bond purchases at a pace that will see it end the program by March. The prospect of the Fed tightening financial conditions as described in the minutes reverberated through the bond market, with the yield on the 10-year Treasury bond rising from 1.51% to 1.77% over the course of the week.