Today we’ll have three quick blog posts discussing some data from this month’s nonfarm payrolls report. In this first post, we’ll focus on wages. As shown in the chart below, YoY growth of average hourly earnings for all private employees is at its strongest pace since the aftermath of the recession. YoY growth for last month was also revised up to +2.7%. As shown below, though, production and non-supervisory average hourly earnings growth (pay for non-managerial earners) is not accelerating as dramatically. We should also note that earlier this week the employment cost index for Q4 showed the strongest YoY wage and salary growth in the post-recession period. The ECI adjusts for the composition of the labor force, so if anything the relatively strong pace of growth we’ve seen in wages recently could be understated.

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Manufacturing activity in the US appears to have kicked off the year on a positive note as the ISM Manufacturing report for January saw a slight decline but came in higher than expected.  While economists were forecasting a headline print of 58.6, the actual reading came in at 59.1 compared to December’s reading of 59.3.  Despite the decline, it was still the fifth highest monthly print of the current expansion.

Commentary from respondents was also positive this month.  Outside of the Fabricated Metals sector, manufacturers are seeing strong levels of business to start 2018.

The table below breaks down this month’s report by each of the index’s subcomponents relative to last month and last year.  Over both time frames, breadth in the report was strong.  On a m/m basis, just three of ten subcomponents declined (Production, New Orders, and Employment- chart below), while on y/y basis, Customer Inventories and Employment were the only decliners.  On the upside, Prices Paid saw a pretty big increase this month rising to its highest level since May 2011.

As regular readers are aware, we pay a lot of attention to monthly truck sales.  Trucks are not only higher margin, but they are often purchased by small businesses and contractors so they provide a good read on the health of the small business sector.  Based on these sales totals for January, small businesses are still expanding, but the pace of sales growth in January slowed after a Monster December.  For the month of January, total truck sales came in at 58,937.  While that’s a strong number relative to history (5th strongest since 1996), on a y/y basis it represents an increase of only 1.6% even though this past January had one extra selling day compared to January 2017. It’s hard to complain when sales are so close to the high end of their historical range, but it’s something investors have come to expect.

For all the talk about a supposed correction in the last few days, you wouldn’t know it from the chart of the S&P 500 and bullish sentiment below.  If you squint real close, you can see something resembling a small decline for the S&P 500 (red line), but it’s negligible at best. That hasn’t stopped individual investors in the weekly AAII survey from becoming a little bit more cautious, though.  In this week’s survey, bullish sentiment declined from 45.5% down to 44.8%.  That’s the third weekly decline in the last four weeks, and during that time the bullish ranks have thinned by 15 percentage points.  We’ve commented in the past several days that because markets have seen such a steady climb upward, even small declines in equity prices may spook investors and you could argue that the weekly sentiment numbers from AAII are showing just that.

Bearish sentiment, meanwhile, has been moving in the opposite direction.  This week’s survey showed an increase in pessimism of nearly five percentage points as bearish sentiment increased from 24.0% up to 28.8%.  In the last four weeks, bearish sentiment has now nearly doubled from its second lowest reading of the bull market back in early January.