- The 4Q Employment Cost Index rose .8% versus estimates of a .9% increase and a .8% gain in 3Q.
- Consumer Confidence rose to 106.3 in January versus estimates of 105.0 and a reading of 103.8 in December.
- The Chicago Purchasing Manager Index for January fell to 58.5 versus estimates of 59.9 and a reading of 60.8 in December.

BOTTOM LINE: US labor costs rose less than expected in the fourth quarter, suggesting tame inflation, Bloomberg reported. Employment costs rose 3.1% for all of 2005, slowing for a second straight year. Unit labor costs account for two-thirds of inflation. Core US consumer prices gained 2.2% last year, right at the average of the last decade. I continue to believe employment costs will remain relatively low over the intermediate-term, thus helping to keep inflation in check.

US consumer confidence rose more than expected in January to the highest since June 2002 as employers accelerated hiring, Bloomberg reported. Employers added 2 million new jobs in 2005, the second best number since before the stock market bubble burst in 1999. The component of the index measuring optimism about consumer’s present situation surged to 128.4, the highest since 2001, versus 120.7 the prior month. The percentage of consumers that saw jobs as plentiful rose to 26.9%, the highest since September 2001. I expect consumer confidence readings to make new cycle highs later this year as stocks rise further, the job market remains healthy, housing stabilizes at relatively high levels, long-term interest rates remain low, inflation decelerates and energy prices fall.

Chicago-area manufacturing expanded at a slower pace this month as automakers cut capacity to reduce costs and restore profits, Bloomberg said. The prices paid component of the index fell to 75.3 from 81.1 the prior month. The new orders component of the index fell to 63.7 versus 65.7 in December. I continue to believe manufacturing nationwide will add to economic growth this quarter as inventories are rebuilt, confidence improves and hurricane rebuilding takes hold.