The Fed may have received the evidence they wanted on Friday. The U.S. added 161,000 Jobs in October, adding to the jobs gained in August and September. Health care companies, white-collar professional outfits, and financial firms were the top industries creating jobs. Unemployment fell to 4.9 percent from 5 percent. Hourly wages rose .4 percent in October to $25.92. The U6 rate, which included part-time employees that can’t find full-time work and discouraged job seekers, fell to 9.5 per cent from 9.7 percent. However, Weekly Jobless Claims rose slightly to 265,000, though, expectations were that it would remain at 258,000.
In addition to the positive news in the U.S., other countries were also reporting encouraging data. China reported strong manufacturing data; which, leads to greater confidence in global growth. Chinese PMI rose to a two-year high of 51.2 up from 50.4 in September. The Bank of England held its interest rates unchanged and signaled there will be no further easing in 2016 as England has been surprised with stronger than expected economic data. They noted that business sentiment and indicators of activity recovered from their lows after the referendum to exit the European Union and estimated GDP growth in the third quarter was better than expected. They even raised the inflation forecast from 2.0 to 2.7 percent. Unemployment in the Eurozone is at its lowest rate since 2011.
The Institute for Supply Management, ISM, reported that its Manufacturing Index rose slightly to 51.9 percent in October, up from 51.5 percent in September. U.S. manufacturers’ employment grew for the first time in 4 months, an index that measures manufacturing employment rose from 49.3 in September to 52.9 percent in October. ISM’s Production Index also increased in October to 54.6 percent, up from 52.8 in September. This is an encouraging sign for the U.S. economy. A similar survey, Markit PMI, also showed an increase. Markit’s index reached a new 52-week high. Despite the encouraging numbers, the index for new orders slipped to 52.1 percent from 55.1 percent in September. This could mean that companies are in a holding pattern until after the Presidential election. Only 10 of the 18 industries tracked by ISM reported growth. If the economy was going well, you would have more industries showing growth.
Meanwhile, Outlays for Construction Spending fell in September by .4 percent, according to the Commerce Department. Economists were expecting a .4 percent increase.
Factory Orders were up by a seasonally adjusted 0.3 percent in September. Durable goods declined 0.3 percent while nondurable goods increased by .9 percent in September. U.S. Productivity increased 3.1 percent from July through September. The improvement stems from more goods and services being produced; however, the amount of time workers work, was only up .3 percent. Productivity has been slow to improve during the economic recovery. Productivity is less than half historical average and there are no signs it is picking-up. Unit-labor costs are only up 2.3 percent this year and have narrowed since early 2015. Hourly compensation (wages and benefits) rose 3.4 percent annually in the third quarter. When accounting for inflation, the increase was just 1.7 percent.
Despite this week’s positives, stocks continued to trade lower. Again, as the election is nearing, people are reluctant to invest. On Friday, the S&P 500 finished lower for the 9th consecutive day. This is the longest losing streak for the S&P since 1980. The S&P closed at 2,085.18. The Dow Jones Industrial Average, lost 42 points, closing at 17,888.28 and the Nasdaq Composite Index closed slightly lower, at 5,046.37.
Up ahead for this week:
Monday - Consumer Credit
Tuesday - NFIB Small-Business Index; Job Openings
Wednesday - Wholesale Inventories
Thursday - Weekly Jobless Claims, Federal Budget
Friday - Consumer Sentiment
Thank you for your business and have a successful week!