Hello, this is Claire Ellerhorst, Senior Portfolio Manager at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices ended higher last week, boosted by a stronger-than-expected jobs report. The S&P 500 Index and Nasdaq Composite each clocked their fourth straight weekly gain, rising 0.3% and 0.1% in total return, respectively. The Dow Jones Industrial Average also rose 0.1% in total return for the week. U.S. Treasury yields rose as strong labor market data led market participants to lower expectations for Federal Reserve interest rate cuts by year-end. Crude oil prices rose and gold fell slightly for the week.
The highly anticipated September labor market report showed U.S. employers added 254,000 jobs to payrolls last month, significantly ahead of consensus expectations and the highest headline level since March. The prior two months of payroll numbers were also revised higher and the unemployment rate ticked lower to 4.1% for September. Average hourly earnings rose 4.0% from a year earlier and the labor force participation rate held steady at 62.7%. The report highlighted that despite recent cooling, the labor market remains strong.
Expectations for the next Federal Reserve decision moved decidedly back towards a 25-basis point rate cut versus another 50-basis point cut, though there are several more notable economic releases before the monetary policy committee meets in early November. In comments made prior to the labor data release, Fed Chair Jerome Powell said the central bank is not in a hurry to cut rates quickly. The move in expectations brings the market in line with Fed officials, as the Summary of Economic Projections indicates forecasts for two more 25-basis point rate cuts before year-end.
In other economic news, the Job Openings and Labor Turnover Survey showed the number of available jobs in the U.S. grew in August to more than 8 million, another sign of strength in the labor market. The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) held steady in September. The ISM PMI remains in contractionary territory at a level below 50, but the new orders component improved, and prices paid for inputs declined to a nine-month low.
The highlight on the U.S. economic calendar this week will be the report on the September consumer price index (CPI) released Thursday. As of Friday, economists expect year-over-year core CPI to remain unchanged at 3.2%. The Fed will be in focus as well, with several officials scheduled to speak and minutes released on Wednesday from the September meeting. Third quarter earnings season officially kicks off this week.
As always, we’ll be watching and reporting back to you. Thank you.
