Today’s payroll report from Washington presents a bleak picture. Analysts had anticipated that the Labor Department would announce an addition of 200,000 jobs in September. Instead, the figures reveal a mere increase of 118,000 in private payrolls. The silver lining is that the year-over-year growth is still robust, showing a 2.2% increase as of last month. However, the annual growth rate is continuing to slow down. Does this indicate a potential recession for the U.S? Not just yet, but today’s data certainly doesn’t instill confidence that we can avert economic challenges. As I have mentioned over the last month, macroeconomic risks have been on the rise. Although we lack a distinct signal that the business cycle has shifted into a downturn, today’s employment report tips the scales a bit further toward a pessimistic outlook for the economy.
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The recent fluctuations in the market have downgraded the healthcare sector from its previously dominant performance among major U.S. equity sectors. Leadership has shifted to consumer discretionary stocks, according to trailing one-year total return data from various ETF proxies. Despite most sectors suffering declines since August, the market reshuffling has placed the Consumer Discretionary SPDR ETF (XLY) firmly in the lead.
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● U.S. jobless claims have increased but remain near 15-year lows | Bloomberg
● U.S. ISM Manufacturing Index for September declined to its lowest level since January | WSJ
● U.S. Manufacturing PMI for September now at its second-lowest level since October 2013 | Markit
● U.S. construction spending in August increased to levels not seen in over seven years | USN&WR
● U.S. consumer comfort index rises to its highest level since mid-July | Bloomberg
● Global Manufacturing PMI growth dipped to a two-year low in September | Markit
Private nonfarm payrolls in the U.S. are anticipated to rise by 177,000 (seasonally adjusted) in tomorrow’s labor report for September. This projection is based on The Capital Spectator’s average forecast from various econometric estimates. This prediction indicates a modest uptick from the 140,000 job gain reported in August.
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A forecast suggesting a weak U.S. economy as the year comes to a close just became more pessimistic. The Atlanta Fed’s widely cited GDPNow model has halved its estimate for third-quarter GDP growth. Previously, the forecast projected a meager 1.8% increase, substantially below Q2’s solid 3.9% growth. The revised expectation for Q3 now stands at a mere 0.9% (seasonally adjusted annual rate).
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The Labor Department reports a rise in U.S. jobless claims from the previous week, although new applications remain near historic lows. Despite this recent uptick, today’s statistics indicate that the labor market is still showing signs of growth. This suggests that recent unrest in global markets and diminishing expectations for the world economy have yet to noticeably impact the positive trajectory of the U.S. macroeconomic landscape.
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September was another challenging month for most major asset classes. The notable exception was U.S. real estate investment trusts (REITs), which saw a 3.0% increase last month, as per the MSCI REIT Index. Fixed income investments also provided some solace, with investment-grade bonds in both the U.S. and foreign developed markets inching higher due to renewed global growth concerns prompting investors to seek safety. However, red ink dominated the broader market as the third quarter came to a close.
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● ADP: U.S. private payrolls rose by a solid 200,000 in September | RTT
● U.S. mortgage applications fell last week following a previous surge | HousingWire
● Chicago PMI dropped in September, marking its lowest reading since 2009 | 24/7 Wall Street
● China’s official Manufacturing PMI rose slightly in September | CNBC
● The IMF head anticipates another downgrade of global economic growth | NY Times
● Modest growth for Eurozone Manufacturing PMI in September confirmed at 52.0 | Markit
● Markit’s China Manufacturing PMI was slightly revised upwards to 47.2 | CNBC
The ISM Manufacturing Index is projected to drop to 50.6 in tomorrow’s September update, compared to last month’s figure. This estimate is slightly above the neutral mark of 50.0. While it indicates a potential for growth in the manufacturing sector, it’s a marginal forecast.
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The latest ADP Employment Report indicates that private-sector job growth gained momentum in September. U.S. companies added 200,000 jobs to their payrolls, which is a notable increase compared to the revised figure of 187,000 for August. These positive numbers hint that the official jobs report to be released on Friday could also show encouraging results for September. In the meantime, this data counters any narrative suggesting a decline in the U.S. economy this month.
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