By Rick Schwerd |
Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for
our next update on October 16.
Slightly Softer Labor Market Report
The U.S. added 29,000 jobs in September, below the 90,000 that was expected by economists. The unemployment rate
increased by a tenth of a percentage point to 4.2 percent. While a bit softer than expected, it remains in ranges we
have seen over the past year. The report provided further evidence that we remain in a low-hire, low-fire
environment. Average hourly earnings for the month were up 3.0 percent, which is keeping up with inflation, but
providing little, if any, real wage growth for American workers.
Both equity and bond markets rallied early Friday following the report. Last month’s labor report was regarded
as strong, which weighed on bond markets, pushing up yields. This month’s report was initially viewed as
having a Goldilocks feel, not too hot, not too cold. The report, along with recent inflation data, may allow the
Federal Reserve to take a wait-and-see approach at its upcoming October meeting, following the September
quarter-point rise.
Yields Hit Multi-Decade Highs
The benchmark 10-year U.S. Treasury bond breached the 5.25 percent level for the first time since 2007 this week. The
10-year surged half a percent during August, breaking out of a three-year trading range. We’ve written before
that the 5 percent level may cause equity prices to drop. However, stocks have taken the surge in yields largely in
stride. Markets have looked past the higher borrowing costs and focused on the fact that the economy is strong and
appears to be improving as the recent economic releases have been positive.
The S&P 500, which currently sits at 7,671, was essentially flat for September and approximately 1.5 percent
below its all-time high. The tech-heavy Nasdaq was positive during September, up nearly 2 percent. The index is
about 1 percent below its all-time high, which was recorded September 22.
Good Economic Data
We received several positive economic data points this week. The final revision to the second-quarter GDP estimate
was revised up to a healthy 2.2 percent. Third-quarter estimates are in the 2.5 percent to 3.0 percent range. The
Personal Consumption Expenditure (PCE), the Fed’s favored inflation index, came in flat month-over-month at
3.4 percent with the Core-PCE stationary as well, at 3.0 percent. Both were below expectations, although they
remained above the Fed’s 2.0 percent target.
The Institute of Supply Side Management, Manufacturing Index, a monthly survey of 400 leading industrial companies,
came in at 54.5 for September, down a tenth of a percentage point from August, but remaining at a strong level. The
index remained below 50, a sign of contraction, for most of the period from late 2022 until January of this year.
This is a strong signal that we are seeing positive momentum in U.S. manufacturing.
Looking Ahead
Next week is relatively quiet, but the following week heats up with both the Consumer Price Index (CPI) and Producer
Price Index (PPI) inflation data as well as September retail sales data. We also see the unofficial start of
third-quarter earnings season on October 13, as the large banks begin reporting earnings.
Enjoy a great weekend and, as always, if you have any questions or concerns regarding markets or your financial
planning needs, please reach out to us at (518) 415-4401.
About the Author: With almost three decades of financial industry experience, Rick serves as a
Senior Investment Officer at Arrow Bank. He oversees individual and corporate retirement plans, personal trusts,
investment management accounts, foundations and not‑for‑profit relationships.