U.S. LABOR MARKET REMAINS SOLID BUT SLOWING:  In December, the U.S. economy added another 223,000 jobs.  The unemployment rate moved down from 3.6% to 3.5%.  There are now 1.24 million more jobs in this country than their were before the COVID government shut downs began.  The number of new jobs in December was the smallest monthly gain in two years.  Average hourly earnings were up 4.6% from a year ago, also a sign of slowing as that is the smallest year-over-year increase in about a year and a half.  This number peaked at 5.6% last March.  The Labor Force Participation Rate rose from 62.2% to 62.3%, but that is still well below 2019 figures.  The tech sector of the economy actually shed 5,000 jobs in December, and Amazon just announced it was shedding 18,000 workers.

YEAR GETS OFF TO A POSITIVE START:  The late-in-the-week jobs report buoyed stock markets in the U.S. and globally.  For the week, just about every major index was up well over 1% getting the year off to a good start.  It is nice to see all the black numbers in the table below.  The jobs report was higher than most economists expected, giving investors confidence that the economy is not weakening too fast.  It also grew by a low enough number to keep investors from panicking about the Fed.  The slowing wage growth number provides some confidence that perhaps wages will slow enough to keep inflation under control.  Investors are going to continue to parse data to determine whether the U.S. enters into an oft-predicted recession in 2023, and if so, how deep and long.

LONGER-TERM PERFORMANCE:  Below are the annualized three-year and five-year numbers for these same indices.  

THE EARNINGS REPORTS ARE COMING!:  Some real data on how companies are actually doing will affect the markets beginning next week.  Of note, Bed Bath & Beyond will be posting its earnings amid speculation that it may be filing for bankruptcy protection.  KB Homes and JP Morgan will report which will give us an indication as to the overall health of housing (not good) and the finance sectors.

2022 WAS REALLY BAD FOR BONDS:  2022 was a bad year for bonds.  Here is more data showing just how bad.  For long-term corporate bonds, using nearly 100-year-old data, it was the worst.

EUROPEAN INFLATION STILL HIGH, BUT SLOWING:  Inflation in the European Union was 9.2% higher in December from a year prior, but that is actually progress from the 10.1% figure from November.  Home energy prices surged due largely to the Russian invasion of Ukraine.  Home energy prices were up 25.7% in December from a year earlier, but that is down from the 34.9% figure in November.  The winter is getting off to a mild start, which is helping.

GLOBAL ECONOMIC ACTIVITY STILL CONTRACTING:  There is no doubt that the collective activity of central banks across the globe have successfully slowed global economic activity.  According to the J.P. Morgan Global Composite Output Index, global activity was up just a bit in December from November, but November was at a 29-month low.  So the contraction is showing a bit of easing, but global economic activity, at least measured by this index, is still registering its weakest readings in 15 years.
(Source: pmi.spglobal.com/Public/Home/PressRelease/a2054171fdf64194bd2aebd52d16c665)

BUZZ RETIRES:  For the past twenty-plus years, our auto mechanic Buzz has been a godsend to us.  He is honest and competent and reasonable.  When you have a mechanic like that, you have the confidence to keep your cars going a bit longer.  Buzz got us through some lean years when we really wanted to keep our auto expenses under control, and he got us through the years of having teen drivers (we made them drive junkers).  Buzz retired last week, and I am now in search of a new mechanic.  It is very hard to replace someone you trust implicitly.  I am very happy for Buzz, but I wish he could have continued in the business longer or developed young, honest and competent mechanics that could have taken over for him (not an easy task I am sure…and maybe he tried).  About ten years ago, my doctor retired, and it took me about five years to find a great replacement (a concierge doctor…I highly recommend it).  I hope it does not take me five years to find a new mechanic.  

UNITING THE COUNTRY:  One of the most horrific and yet encouraging things happened this week, and you all know what I am talking about.  A football player almost died on national, prime time television.  Before last week, very few people outside of Buffalo knew the name Damar Hamlin, a second year defensive player for the Buffalo Bills.  Now, he has become someone the entire nation loves and prays for.  Grown men cried and got on their knees together on national TV.  Professional announcers who are paid to talk were at a complete loss for words, but after slow deliberation, most got it right, and said unifying, edifying things that drew us all together.  By all accounts, Hamlin is a wonderful, generous, humble young man, and by the grace of God he survived and appears to be recovering nicely.  For a brief moment, the national response to this horrific scene (that appears to be having a happy ending) gave us something about which we could be collectively proud.  We united, generously gave to his charity, and prayed. 

Have a great year!

“When you put real love out into the world it comes back to you 3x’s as much.” Damar Hamlin

“A new command I give you:  Love one another.”  John 13:34 (NIV)

SOURCES:
 U.S. LABOR MARKET REMAINS SOLID: bls.gov/news.release/empsit.nr0.htm AND wsj.com/articles/december-jobs-report-unemployment-rate-economy-growth AND wsj.com/articles/amazon-to-lay-off-over-17-000-workers-more-than-first-planned
EUROPEAN INFLATION STILL HIGH, BUT SLOWING:  wsj.com/articles/warmer-weather-helps-ease-europes-war-driven-inflation-surge
2022 WAS REALLY BAD FOR BONDS: Target Date Funds AND horsesmouth.com/putting-2022-market-performance-in-perspective

(c) 2023 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets. 
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States. 
*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.