It is as difficult to forecast growth as economic recession…

You can’t raise taxes in a recession.”

Mariano Rajoy

Two of the economic publications of the week validated the decision to postpone the start date of the recession. In November, the buoyancy of employment again surprised to the upside and wage growth accelerated.

In October, consumer spending was stronger than expected, leading to anticipation that fourth-quarter GDP growth is on track to increase to around 2% annualized.

There are elements in the employment reports, personal income and expenses, which provide reasons to expect some cooling in the labor market and in the general economy.

Companies are reducing hours worked, which are usually the first signal to anticipate the start of layoffs. The working week for private jobs fell from 34.5 to 34.4 hours. The average workweek in manufacturing fell 0.2 hours to 40.3, and overtime was down.

Hours may be further reduced, companies are hesitant to lay off workers, particularly the least skilled, due to labor supply constraints.

The response rate in the establishment survey fell 17 percentage points to less than 50% in November; we don’t have a full explanation for the drop, but it could show up in revisions to the Job Openings and Labor Turnover Survey data for October, which revealed declining job postings and falling share of job postings to workers unemployment, although both are high.

Claims for unemployment insurance continue to rise, while initial claims remain low. Consumer spending still has co-momentum and we expect it to slow as demand for goods picks up.

It should be noted that income increased in October, thanks to tax credits sent to households, which will not be repeated.

Additionally, households are depleting their excess savings, which we believe fell by $90 billion in October to $1.6 trillion, as the savings rate fell to its lowest level since 2005.

The remaining savings are likely to be concentrated among high-income households, who are more likely to view them as wealth, rather than cash. The Fed looks for strong evidence that inflation is moderating, before taking its foot off the brake.

The president of the Fed, affirmed that the organization is analyzing three components of inflation: inflation of goods, the part of housing in inflation of services and inflation of other services.

Powell noted that the trend in property prices has been encouraging and there is reason to be hopeful about the evolution of rental inflation, given the lags between market rents and house prices.

However, there is no strong evidence that the prices of other services, which Powell linked to job growth and wages, are on a downward trend. So the Fed should continue to raise rates.

The data published in the week include reports that underline the weakness of the housing sector.

Pending home sales fell for the fifth straight month in October, pointing to a decline in existing home sales for November, which will appear next month. In October, construction spending fell 0.3 percent.

Mortgage rates have fallen 50 basis points in the past two weeks, prompting a return from some potential buyers.