The U.S. Economy Created 136,000 Jobs in September… The unemployment rate fell from 3.7% to 3.5%.
What it means – The jobs number fell short of estimates by about 9,000. The big news in the report, however, was the revision of the August jobs, up from the initial number of 130,000 to 168,000. The markets took the upward revision as a great sign, even though it represents less than .02% of the workforce.
The falling unemployment rate is something of a conundrum when paired with the flat reading on average hourly earnings. For the year, earnings are up 2.9%. That’s about 1% more than inflation, but not enough to write home about. We’d expect that, with so few available workers, businesses would be bidding for employees, essentially driving up income. That’s not happening.
On another positive note for jobs, the birth/death adjustment knocked 71,000 off the non-seasonally adjusted total. Without that, the number of jobs created would have been higher.
Overall, investors saw a report that didn’t show the U.S. economy spiraling into a recession, but still exposed enough weakness to support another Fed rate cut.
Institute of Supply Management Manufacturing Index Flashes Contraction… The ISM Manufacturing Index came in at 47.8, well below the estimate of 50. Any reading under 50 signifies contraction
What it means – This was the second reading under 50 in many months, and the lowest reading since 2009. That’s not a good sign. While most areas showed weakness, the worst sector by far was exports. It dropped to 41 and was below 50 for the third straight month. New orders and back orders were also below 50.
The equity markets took a step back on the news, noting that a slowdown in manufacturing should spill over into the GDP readings for the third quarter. This could be telling us that a recession is around the corner. The latest reading took the Atlanta Fed’s GDPNow estimate of third-quarter GDP down from 2.1% to 1.8%. While slowing, it is not forecasting a recession.
Factory Orders Down 0.1% in August, Better Than the Expected 0.6% Drop… The overall number was better than expected, but still down.
What it means – Under the hood, the numbers weren’t encouraging. Core capital goods, non-defense excluding aircraft, were revised down from last week’s initial 0.2% decline to a 0.4% drop. Backlogs increased a bit, while shipments slowed. Overall, the weak numbers will embolden the Fed members who want to cut rates again this year. However, unanimity is still lacking on whether lowering rates is the correction action.
U.S. Imposes New Tariffs on European Goods… After winning case against Europe for providing illegal subsidies to Airbus, the U.S. imposed tariffs on $7.5 billion worth of European goods.
What it means – Everything from Scotch whiskey to French wine will cost a bit more after the Trump administration slapped a 25% tariff on a slew of European goods. But don’t fret. Trump exempted several things, like Italian Wine, European chocolate, and a number of high-end goods. In the big picture, $7.5 billion worth of imports isn’t that much when you consider that we buy about $200 billion worth of goods from the Europeans every year. However, it will still probably bring some sort of retaliation from the Europeans.
Federal Judge Rules Against State of New York in Case of Local Taxes… The state of New York sued the federal government for limiting the amount of state and local taxes (SALT) that can be deducted on federal tax returns.
What it means – Government officials in high tax states from New York to California were livid with the details of the 2017 Tax Reform Act. Among other things, it limited the amount of SALT taxes that individuals could write off their federal tax bills. It essentially means a chunk of the burden for lowering federal taxes was shifted to their constituents. New York sued the federal government, claiming it was interference in state sovereignty, but lost. The judge ruled that the federal government was making rules about its own tax structure, and that New York, along with other states, was free to do the same.
By limiting the amount people can deduct, the federal government is requiring people in those states to pay more in federal taxes. They can always pay lower taxes overall by either moving to a low-tax state or voting for their own states to lower taxes.
City of Portland Oregon Bans Urinals… It’s about to get harder to tell the difference between the men’s room and the women’s room in city facilities in Portland, Oregon. And that’s the point. In a nod to the explosion in gender identity possibilities, the city has decided to remove anything that might cause an offense or inconvenience to those who find themselves dressed for one room, but anatomically equipped for another. Removing urinals will allow more space for stalls, which can handle anyone.
Unfortunately, it’s likely the city will either spend a lot more on cleaning, or have much dirtier stalls, as they deal with men who use stalls but have poor aim.
Portland residents get to foot the $200 million bill for the politically correct renovation.
Data supplied by Dent Research/Delray Beach Publishing
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