Introduction

The effects of Donald Trump's Republican sweep, on the economy and on Fed policy, have yet to unfold. But looking only at the economic data, a rate hike would appear, at least to some, as a lock for the December FOMC.

The economy

It's simply harder and harder to find the right person. Job openings in the JOLTS report rose a monthly 0.6 percent in September to a total of 5.486 million, yet hiring actually fell, down 3.5 percent to 5.081 million. Year-on-year rates also speak to a mismatch, up 2.4 percent for openings and down 1.0 percent for hires. As seen on the graph, job openings in this series first began to overtake hiring about two years ago in what, as far as monetary hawks are concerned, is a set-up for wage inflation — that employers may soon have to offer more to bring in the people they're looking for. JOLTS (which wins my vote for best indicator name) stands for Job Openings and Labor Turnover Survey.

Another indication of labor market strength, or at least improvement, comes from the Federal Reserve's labor market conditions index. This wide-ranging composite of 19 components rose to plus 0.7 in October which doesn't sound like much but is only the third positive reading of the last nine months. This composite is picking up October's strong jump in average hourly earnings as well as positive anecdotal signals such as extended declines in the number of people who say jobs are hard to get (part of the Conference Board's consumer confidence report). Another positive is an upgrade to the prior month, to minus 0.1 from an initial minus 2.2 and reflecting that month's upward revision to average hourly earnings. The labor market conditions index, though considered experimental by policy makers, may nevertheless be offering its own signpost, that is the beginning of an upward pivot perhaps for the labor market.

Not experimental at all is the jobless claims series which, like the JOLTS report, also indicates that employers are holding on tightly to their employees. Initial claims fell 11,000 in the November 5 week to 254,000 with the 4-week average at 259,750, both in step with this year's slowly declining trend. Continuing claims tell the same story, at 2.041 million in lagging data for the October 29 week with the 4-week average nearly the same, at 2.040 million. Initial claims are at 45 year lows and, relative to the size of the labor force, are at post-war lows. Continuing claims are at record lows in data that go back 15 years. And one more thing, the unemployment rate for insured workers held unchanged for the 8th straight week at 1.5 percent, a record low echoed in the details of the JOLTS report where the September layoff rate fell 2 tenths to a very thin 1.0 percent.

A strong jobs market, together with improving wages, are of course strong positives for the consumer. The prior week's jump in unit vehicle sales offered a strong first indication on October spending while the latest consumer sentiment report is offering a strong indication on November spending, at least very early on in the month. The consumer sentiment index, which was compiled before the November 8th election, rose more than 4 points in the November flash to 91.6 for the best showing since June. The gain is concentrated in the expectations component which rose nearly 6 points to 82.5 to indicate rising confidence in the jobs outlook. Current conditions also rose, up nearly 3 points to 105.9 which specifically points to monthly strength in consumer spending. And rising spirits are confirmed by inflation expectations which are suddenly showing life, up 3 tenths for both the 1-year and 5-year readings and with both at 2.7 percent. But the jury for November is still out and the comparison of the pre-election flash with the final November reading (to be released on November 23) promises to offer an interesting barometer of Trump's victory on the consumer's mood.

Other news in the week include inventory data which are under special attention following their large, perhaps unwanted, contribution to third-quarter GDP. But inventories at the wholesale level look stable, up only 0.1 percent in September following a 0.1 percent decline in August. Sales at the wholesale level in September rose 0.2 percent, keeping the stock-to-sales ratio steady at a constructive and lean 1.33. In a special positive, wholesale inventories of autos fell 1.7 percent in a draw, based on the strength of October vehicle sales, that will have to be rebuilt. There are no alarms in the wholesale report but the risk that inventories may be too high is nevertheless a key concern for the economic outlook, specifically that high levels of unwanted inventories could slow fourth-quarter production and employment growth.

High inventories are also a concern in the energy sector. Oil inventories have built up the last two years and in the latest data for the November 4 week came in at 485 million barrels. This is down from 500 million barrels during the spring but up from September's 470 million level. On-and-off talk of OPEC production cuts can make for short-term gains in prices, such as in October when West Texas Intermediate traded above $50, but prices have held in the $40 to $50 range all year. Energy development was a Republican theme during the election, but high stockpiles and low prices are not a positive mix for new production.

Markets: Stocks up, bonds down

Donald Trump's sweeping victory made for major gains in the stock market, though his plans for new infrastructure and defense spending made for a major sell-off in the bond market. The 10-year Treasury yield shot up an enormous 38 basis points in the week as fiscal stimulus points to increased Treasury supply. The move in the 10-year yield cut the year-to-date decline, which had been as much as 80 basis points in July, down to only 12 basis points. This sudden move higher will not be of much help to the housing market where low mortgage rates have been a major plus. Yet fiscal stimulus is a likely plus for corporate profits as the Dow, posting back-to-back record closes on Wednesday through Friday, rose a total of 5.4 percent in the week to 18,847. But the rise in yields is not a plus for gold which pays no yield. Gold tumbled 6.2 percent in the week to $1,225.

The bottom line

The outlook for the Federal Reserve as an institution may be unclear following the Republican sweep, but the outlook for the December FOMC is less unclear. Average hourly earnings posted an eerie jump in the prior week's October employment report, a jump that raises the risk of a wage-inflation flashpoint and, together with solid job gains and solid strength in consumer spending, arguably warrant the first withdrawal of stimulus in a year's time.

Week of November 14 to November 18

A very busy week opens on Tuesday where another surge in vehicle sales is expected to lift retail sales by 0.6 percent for a second straight month, a gain that could lift expectations for holiday spending. Factory data will also be front and center, starting with the first anecdotal look at November from Empire State on Tuesday and the first definitive report for October from industrial production on Wednesday. But it may be the week's inflation data that could have the most impact beginning with import & export prices on Tuesday, producer prices on Wednesday, and consumer prices on Thursday. Strength in these reports would underscore October's jump in average hourly earnings and likely raise expectations for a rate hike at the December FOMC. Also on Thursday will be housing starts & permits, which are expected to remain uneven, and initial jobless claims which will cover the sample week for the November employment report and are expected to remain low and favorable.

Tuesday

Retail Sales for October

Consensus Forecast: +0.6%

Consensus Range: +0.5% to +0.7%

Retail Sales Ex-Autos

Consensus Forecast: +0.5%

Consensus Range: +0.4% to +0.7%

Retail Sales Ex-Autos Ex-Gas

Consensus Forecast: +0.3%

Consensus Range: +0.2% to +0.4%

The October surge in unit vehicle sales is lifting the outlook for retail sales which are expected to rise 0.6 percent to match September's very strong gain that itself was driven by vehicles. Excluding autos, October's gain is expected to come in only slightly lower, at plus 0.5 percent with ex-autos ex-gas seen at plus 0.3 percent. Gains at the expected rates would lift expectations for fourth-quarter economic growth and holiday spending in particular.

Empire State Index for November

Consensus Forecast: -2.3

Consensus Range: -6.4 to -1.0

The Empire State index is expected to post a negative signal for the November factory sector with forecasters calling for minus 2.3, little better than October's minus 6.8. Wide weakness was the theme of October's Empire State report with new orders at minus 5.60 for a second decline in a row and a sharp contrast to the Philly Fed where strength was evident. There were, however, signs of price pressures in October for both input costs and selling prices with November's price results to get extra attention following the average hourly earnings jump in the October employment report.

Import Prices for October

Consensus Forecast, Month-to-Month Change: +0.4%

Consensus Range: -0.2% to +0.8%

Export Prices

Consensus Forecast, Month-to-Month Change: +0.1%

Consensus Range: -0.1% to +0.2%

The jump in average hourly earnings in the October employment report is focusing new attention on wider inflation data. Import prices, helped by the bounce back for petroleum, and export prices, helped by farm prices, have been improving yet have remained very soft. Prices for finished goods, whether imported or exported, have remain depressed. But forecasters see import prices rising a sizable 0.4 percent in October with export prices up 0.1 percent.

Business Inventories for September

Consensus Forecast,  Month-to-Month Change: +0.2%

Consensus Range: +0.1% to +0.3%

Business inventories have only been edging higher but the build may be too much for what has been softness in sales. Forecasters see September's inventories rising 0.2 percent. Unwanted inventories could become a major economic issue if fourth-quarter growth proves weak.

Wednesday

PPI-FD for October

Consensus Forecast, Month-to-Month Change: +0.3%

Consensus Range: +0.2% to +0.4%

PPI-FD Less Food & Energy

Consensus Forecast, Month-to-Month Change: +0.2%

Consensus Range: +0.1% to +0.3%

At a headline gain of 0.3 percent and a core increase of 0.2 percent, producer prices showed life in September and more is expected for October with the consensus at the same respective gains, 0.3 percent overall and 0.2 percent for the core. Goods prices did snap back in September but not service prices which will have to accelerate to signal wider inflationary pressures.

Industrial Production for October

Consensus Forecast, Month-to-Month Change: +0.1%

Consensus Range: 0.0% to +0.3%

Manufacturing Production

Consensus Forecast,  Month-to-Month Change: +0.3%

Consensus Range: -+0.2% to +0.3%

Capacity Utilization Rate

Consensus Forecast: 75.4%

Consensus Range: 75.3% to 75.6%

Forecasters don't see industrial production picking up much strength in the October report, at a consensus plus 0.1 percent for the headline. But manufacturing production, based on strength in the manufacturing workweek, is expected to show strength, at plus 0.3 percent. Still, breakdowns for the latter have not been strong this year with business equipment weak though vehicle production has shown life. And mining, which has been long depressed, has been showing sporadic gains. The capacity utilization rate is expected to hold steady at 75.4 percent.

Housing Market Index for November

Consensus Forecast: 63

Consensus Range: 62 to 64

The housing market index fell back 2 points in September to 63 but followed August's 6-point surge. Confidence has been strong among the nation's home builders, both for ongoing sales and also future sales. But traffic, held down by lack of first-time buyers and also lack of selection in the new home market, has been a weak point. Forecasters see November's index coming in unchanged at 63.

Thursday

Consumer Price Index for October

Consensus Forecast, Month-to-Month Change: +0.4%

Consensus Range: +0.2% to +0.4%

CPI Core, Less Food & Energy

Consensus Forecast, Month-to-Month Change: +0.2%

Consensus Range: +0.2% to +0.3%

The onset of inflation, following wage data in the October employment report, is a new risk to the outlook. The consumer price index rose a noticeable 0.3 percent in September with pressure centered in both medical and housing costs and also including a price bounce for energy. But when excluding energy and food, the core rate managed only a 0.1 percent gain. Forecasters are calling for a very sharp 0.4 percent rise for the headline CPI in October and a moderate 0.2 percent rise for the core.

Housing Starts for October

Consensus Forecast, Adjusted Annualized Rate: 1.168 million

Consensus Range: 1.111 to 1.210 million

Housing Permits

Consensus Forecast: 1.190 million

Consensus Range: 1.170 to 1.210 million

Housing starts fell a very steep 9 percent in September but the decline was due entirely to an odd and likely one-time 38 percent plunge in the multi-family component that offset a strong 8 percent gain for the important single-family component. Starts are expected to surge 11.6 percent in October to a 1.168 million annualized rate. Permits for both the single-family and multi-family components rose in September but here forecasters see weakness for October with the consensus calling for a 2.9 percent overall dip to a 1.190 million rate.

Initial Jobless Claims for November 12 week

Consensus Forecast: 257,000

Consensus Range: 255,000 to 262,000

Initial jobless claims are expected to rise a very slight 3,000 to 257,000 in the November 12 week which is also the sample week for the November employment report. A sharper-than-expected decline would be a favorable sign for the November report while a sharp rise would be unfavorable. Both initial claims and continuing claims have been tracking at historic lows all year and pointing to healthy conditions in the labor market.

Philadelphia Fed Manufacturing Index for November

Consensus Forecast: +8.0

Consensus Range: +5.0 to +11.3

The Philadelphia Fed index is on a 3-month winning streak with the new orders index on a 2-month streak that includes outstanding strength in the October report. Another strong report would raise talk of a year-end rally for what has been a flat factory sector. Forecasters see the index holding steady in November at a respectable plus 8.0.

Friday

Index of Leading Economic Indicators for October

Consensus Forecast, Month-to-Month Change: +0.1%

Consensus Range: 0.0% to +0.2%

The index of leading indicators is expected to add modestly to September's 0.2 percent gain with a 0.1 percent gain in October. Negatives for October will include the stock market, consumer expectations, and ISM new orders with positives to once again be led by the yield curve. This report has been up and down all year, pointing on net to slow growth for the economy.