The January employment report posted huge job gains of +304k, about twice as much as were expected, though the previous two months were revised down a total of -70k. Job gains were not affected by the government shutdown, but the unemployment rate, calculated differently, ticked up from 3.9% to 4.0%. Wage growth remained steady at +3.2% y/y. Other news has been mixed. Volatile new home sales rose +16.9% m/m in November but they were still down -7.7% y/y. An index of pending home sales, which are more forward-looking, fell -2.2% m/m in December to the lowest level in almost five years. Construction spending rose a sharp +0.8% m/m to +3.4% y/y in November. The Institute of Supply Management’s (ISM) manufacturing report bounced back from a two-year low, gaining +2.3 points to 56.6, but the ISM services index fell -1.3 points to 56.7. Reflecting the effects of tariffs, both indexes showed declines in new export orders, and within services it fell a very steep -9.0 points to 50.5.
