Inflation 1 year

December	3.5%
November	3.4%
Δ Percent	2.94%

Inflation 5 year

December	3.1%
November	2.9%
Δ Percent	6.90%

This is most troubling for the fed. The absolute limits of easing for ‘market functioning’ have to be the point of letting inflation expectations elevate.

Right now, the fed is likely seeing the balance of risks tilting towards inflation.

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On 12/7/07, Karim Basta wrote:
>
>
> NFP +94k
> Net revisions -48k, with Sep revised from 96k to 44k (lowest mthly gain
> since 2/04)But October revised up to 170,000, indicating Sep the low so far, and
> improvement since then. And the Fed surely remember Sep 11 meeting
> where the Aug employment number was reported down and later revised to
> a relatively strong up number.

> UE rate down from 4.727% to 4.658%

And the Fed is concerned a falling labor force participation rate due to demographics means labor tightening with fewer new jobs.

> Most important to me was the diffusion index dropping below 50 (more
> industries losing jobs than gaining jobs) for the first time since Sep 2003

Yes, but only just below to 49.8 from 53.

> Retail job change from -15k to +24k looks suspect and reflective of poor
> seasonal adjustment factor;likely borrowing heavily from Dec job gwth
> Index of aggregate hours up 0.1% and avg hrly earnings up 0.5% (off a low
> 0.2% last mth)

Might result in Fed upward revisions for q4 gdp?

>
> Base case for next week is -25bps on FF and -50bps on DR.

Change in Nonfarm Payrolls (Nov)

Survey	80K
Actual	94K
Prior	166K
Revised	170K

Better than forecasting, and jobs being added about as fast as the fed thinks possible given fed perception of current demographics – no slack evident. Sept revised down and October up to 170,000 so the chart looks fine.

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Unemployment Rate (Nov)

 

Survey	4.8%
Actual	4.7%
Prior	4.7%
Revised	n/a

 

Better than forecast, and still well below the fed’s ‘unspoken’ concern that anything below 5% is more than non-inflationary full employment level.

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Change in Manufacturing Payrolls (Nov)

 

Survey	-15K
Actual	-11K
Prior	-21K
Revised	-15K

 

Average Hourly Earnings MoM

 

Survey	0.3%
Actual	0.5%
Prior	0.2%
Revised	0.1%

 

Above expectations, nudges up inflation risk.

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Average Hourly Earnings YoY

 

Survey	3.8%
Actual	3.8%
Prior	3.8%
Revised	3.6%

 

Average Weekly Hours (Nov)

 

Survey	33.8
Actual	33.8
Prior	33.8
Revised	n/a

 

Total hours holding up nicely and growing some – could see Q4 GPD numbers revised up by some firms.

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U. of Michigan Confidence (Dec P)

Survey	75.0
Actual	74.5
Prior	76.1
Revised	n/a

 

This is also from watching CNBC.

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Consumer Credit (Oct)

Survey	$5.0
Actual	$4.7B
Prior	$3.7B
Revised	$3.2B

 

Still in a reasonably narrow range.

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