Perspective: Morning Commentary for December 3

By: Arlan Suderman, Chief Commodities Economist

Fri, 03 Dec 2021, 14:24

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

December 3 – Stocks consolidated overnight ahead of this morning’s long-anticipated monthly jobs report, which will help set the tone heading into the holidays, although traders are also closely watching Congress’ ability to fund the government and to deal with the debt ceiling. The VIX is trading near 26 this morning as it eases back from this week’s spike to a 10-month high just below 33, reflecting gradual easing of fear on Wall Street as we learn more about the Omicron variant of the Covid-19 virus. The dollar index is trading near 96.2 following this morning’s jobs report, while yields on 10-year Treasuries are trading near 1.45%. Crude oil prices are trading 3% higher as they continue to rebound from recent sharp losses, while the Ags traded mixed to higher overnight as well.

This morning’s jobs report provided something for both the bulls and the bears. The bears grasped the headline jobs creation number, while the bulls then focused on other data within the report that was more supportive. The economy created “just” 210K non-farm payroll jobs in November, down from analyst expectations of 545K, although the October number was revised higher by 15K to 546K jobs created. Private payroll jobs increased by 235K in November, down from 628K in October, and less than half the 525K expected by analysts. Manufacturing jobs grew by 31K, down from analyst expectations of 45K. Furthermore, October manufacturing jobs created were revised lower to 48K, down from the 60K originally reported.

But there was also good news in the report. The unemployment rate fell to 4.2% in November, down from 4.6% the previous month and below analyst expectations of 4.5%. The job participation rate rose to 61.8% in November, up from 61.6% in October and up from analyst expectations of 61.7%. That means that more people are joining the workforce. Average hourly earnings rose 0.3% in November, but that was below analyst expectations that they would see constant growth from the previous month at 0.4% month-on-month. Average hourly earnings were up 4.8% year-on-year in November, reflecting wage inflation. However, that was better than the 5.0% rate expected by analysts, while it matched the previous months pace. The average hourly workweek rose to 34.8 hours, up from 34.7 hours previously. People are returning to work. Wage inflation is real, but the pace eased a bit in November.

We’re getting close to full employment now, which gives the green light to the Federal Reserve to speed up tapering. That in turn would allow it to raise interest rates quicker to get inflation under control if overall inflation pressures continue to be strong. Today’s headline job creation number was a disappointment, but the market began to see that the data in this report provides cover for the Federal Reserve to shift more hawkish if it chooses to do so. That may allow it to get control of inflation before it gets out of hand, requiring more drastic actions similar to those implemented by Paul Volker four decades ago. The Fed next meets to discuss policy December 14 – 15.

West Texas Intermediate crude oil prices fell 27% from their October 25 high to their December 2 low, which stopped just short of the August 23^rd low for the lead contract at $61.74 per barrel. This year’s rise above $85 per barrel that peaked in October was a primary contributor to inflation, in addition to supply chain disruptions and other factors. Prices pulled back once world government leaders, including the Biden Administration, came under pressure to do something about inflation. They saw the contribution of energy prices to inflation. Most of the leading economies hold significant debt following unprecedented fiscal stimulus during the pandemic. Releasing strategic petroleum reserves would in theory increase supply, put a dent in inflation, while helping to increase revenue. It represented a paradigm shift for many governments, including the United States. In fact, the recently passed infrastructure bill included provisions to sell an additional 87.6 million barrels per year from 2028 – 2031from these strategic reserves to help pay for the bill. As such, we could see U.S. strategic reserves drop in half from 618 million barrels down to just 314 million barrels by 2032, which would represent roughly a 17-day supply. The United States is clamping down on U.S. production, while also releasing U.S. reserves, while asking OPEC+ to become a larger supplier, trading today’s inflation relief for tomorrow’s greater risks. Many crude oil traders are taking note of that.

Another couple of cargoes of U.S. soybeans were sold to “unknown destinations” – likely China – overnight, providing steady demand. Corn, soybean, and wheat buyers are taking advantage of the recent Omicron correction to build ownership, although wheat demand tends to pull back when prices get too high. The Ag commodities are also seen as a way to diversify portfolios as a hedge against inflation, while traders also monitor crop input prices.

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Perspective: Morning Commentary for August 7

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Mike CastleThu, 06 Aug 2026, 13:24

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Perspective: Mid-Day Commentary for August 5

August 5 – The Dow Jones is ripping higher for yet another session, up safely over 500 points at the time of this writing to carve out another record high; the S&P and NASDAQ are a bit less enthusiastic but the former is still making its own record high, while the latter is less than 500 points off its own top thanks to a strong ongoing week of trade. The dollar is churning lower this morning in an effort to re-test Monday’s 1 ½-month low, while the ten-year note has flipped higher in the mid-morning hours. The CME FedWatch tool interesting has market odds of a quarter-point rate hike next month coming closer to a 50-50 proposition as crude oil prices decline.

Mike CastleWed, 05 Aug 2026, 15:19

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