The Week Ahead – Omaha! Omaha! Hut, Hike!

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

Omaha. For me, I automatically think of two legends in their respective fields, Warren Buffett and Peyton Manning. As many of you know, Omaha is the headquarters for Warren Buffett’s Berkshire Hathaway and Peyton Manning famously yelled the phrase “Omaha, Omaha, Omaha!” on the football field for years. As a lover of random facts I was surprised by these additional tidbits about Omaha: the bobby pin was invented there as well as the Reuben sandwich (take that NYC!), cake mix, Raisin Bran cereal, the ski lift, and the TV dinner! 

The unemployment data released Friday morning was like déjà vu. Another mixed bag of strong hiring activity but continued soft wage growth. Unemployment remained unchanged at 4.1% as the labor force participation rate remained steady while the underemployment rate (the “U-6” measures) increased to 8.0% from 7.9%. Wage growth saw a 0.2% month-over-month increase; however, combined with a downward revision to the prior month, the year-over-year rate is at a muted 2.5%. As mentioned before, wage growth tends to be a good indicator of inflation.

Peyton Manning used “Omaha, Omaha, Omaha!” at the line of scrimmage to confuse the defense and to potentially audible the play called by the coaching staff. With the latest employment data we believe the Fed will stick with the play that they’ve been calling for over the last few months and hike for the third time this year at next week’s FOMC meeting as the data shows continued expansion of the labor market. Key takeaways at next week’s meeting will be the posturing around the three rate hikes reflected by the dot plots in 2018. It’s hard to believe that just two short years ago we were talking about “lifting off” from zero.

Data deck for December 9 – December 15: