The ISM® (Institute for Supply Management®) Manufacturing PMI® reported in at 47.4% for December, as business activity increased (+0.7%) from the previous month, marking the third consecutive month of economic contraction. A value below 50% is indicative of a shrinking economy. The PMI has now been below 50% for 14 consecutive months. "The U.S. manufacturing sector continued to contract, but at a slightly slower rate in December as compared to November. Companies are still managing outputs appropriately as order softness continues.” said Timothy Fiore, chairman of the ISM® Manufacturing Business Survey Committee. None of the six biggest manufacturing industries reported growth in December. The forward-looking new orders sub-index led the way contracting for the 16th consecutive month, decreasing (-1.2%), as it worsened to a 47.1% reading. The Prices Index which measures what companies pay for raw materials and other supplies reported down (-4.7%) to 45.2%, the reading shows raw material pricing dropping, now for the eighth consecutive month. The Employment Index increased (+2.3%) to 45.8%, the reading follows one month of expansion and three months of contraction. The Backlog of Orders Index increased (+6.0%) to 45.3% and has now contracted for the fifteenth consecutive month following 27 months of expansion. The reading is indicative of output exceeding demand.

The Federal Reserve in the release of its December FOMC minutes displayed some optimism in terms of the taming of inflation and opened the door to reducing the federal funds rate in 2024. The minutes indicated that “clear progress” had been made against inflation, as the six-month change measures of total and core personal consumption expenditures (PCE) inflation in October were each at 2.5%. The minutes stated - “In their submitted projections, almost all participants indicated that, reflecting the improvements in their inflation outlooks, their baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024,”. The minutes struck a cautionary tone indicating that – “Participants also noted, however, that their outlooks were associated with an un-usually elevated degree of uncertainty and that it was possible that the economy could evolve”. The FOMC’s quarterly economic projections released after the meeting showed median projections for the federal funds rate of 4.6% at the end of 2024, 3.6% at the end of 2025, and 2.9% at the end of 2026

The U.S. Bureau of Labor Statistics reported 216,000 jobs were added as the unemployment rate remained unchanged at to 3.7% in December. November’s reading was revised down showing (-26,000) less jobs and October’s reading was revised down (-45,000). For all of 2023, 2.7M jobs were added, a significant decline from the 4.8M added in 2022. The number of unemployed workers was little changed in December at 6.3M. Government led the way adding (+52,000) jobs followed by leisure & hospitality (+40,000), healthcare (+38,000), social assistance (+21,000), construction (+17,000), and retail (+17,000). Transportation & warehousing (-23,000) reported job losses. Among the unemployed, the number of permanent job losers decreased (+46,000) to a seasonally adjusted 1.543M, and the number of reentrants to the labor force increased (+12,000) to 1.741M. The labor force participation rate decreased 0.3 percentage points to 62.5%, leaving it is still below the pre-pandemic level of 63.4%. Average hourly earnings grew 0.4.%. At $34.27 average hourly earnings are up 4.1% from a year ago.