After posting a surprising drop in November to -2.21, or only its first negative print since a freak first half of 2013 aberration, the spin was quick to explain away the drop with the government shutdown, which surprisingly affected precisely nothing else in the economy but just a few diffusion indices (and led to epic surges in various PMI prints). Moments ago, the December Empire Fed PMI print came out, and it was once again a dud, printing at 0.98 on expectations of a rise to 5.00 which also was the fifth consecutive miss to expectations in a row. The decline was driven by ongoing weakness in New Orders, which remained negative at -3.54, while Unfilled Orders tumbled deep into the red, from -17.11 to -24.10, while inventories supposedly cratered from -1.32 to -21.69. We say supposedly because other recent surveys have shown that the surge in inventory accumulation from Q3 into Q4 has continued.
The only actual good news was that corporate margins may be finally picking up, as priced Paid declined modestly from 17.11 to 15.66 while prices received rose from -3.95 to 3.61. However, the biggest surprise in the monthly update was not the average employee workweek which declined once again from -5.26 to -10.84, further confirmed by the US Labor Costs data released simultaneously by the BLS which showed a 1.4% decline Q/Q (so much for wage inflation), but the Number of Employees, which as if magically, were 0.00 in November and moved violently to... 0.00 in December. One wonders just whose Non-Random Number Generator the NY Fed is using for this particular time series.
Of course, this blurb may have been just what the market ordered, which rose to fresh pre-market highs on the report, especially since as the Survey announced, "Labor Market Conditions Remain Weak." It adds:
Price indexes pointed to a continued moderate increase in input prices and a small increase in selling prices. The prices paid index was little changed at 15.7, while the prices received index rose eight points to 3.6. Labor market conditions remained weak. The index for number of employees was 0.0 for a second month in a row, indicating that employment levels remained unchanged. The average workweek index was negative for a second month; with a six-point decline to -10.8, the index signaled that workers were working fewer hours, on average."
For the algos, this is the buy signal from god, since whatever is bad for the economy, and workers, is great for the markets, and taper delay.
One final point: as part of this month's survey, the supplementary questions asked manufacturers to assess how much of a problem certain business issues were for their firms and whether the issues were expected to become more or less of a problem in the year ahead. As in earlier surveys, the issue cited most frequently, by far, as a major problem was the cost of employee benefits. Read: Obamacare. Moreover, fully 80 percent of respondents expected that this would become even more of a problem a year from now. Finding qualified workers emerged as the second most widespread problem, eliciting a considerably larger degree of concern than in earlier surveys. This, too, was expected to become more of a problem in the year ahead by a wide margin. In contrast, the availability, cost, and terms of credit were seen as relatively minor problems that would become even less consequential over the next year.
Expect many more laments about Obamacare next year when the full impact on the bottom line is finally felt.
Source: NY Fed [5] [5]