Although some of the recent economic news shows signs the growth of the U.S. economy might be slowing, most of the indicators point to the overall economy increasing at a healthy pace.
Yesterday’s report on wages and spending shows gains of about 1 percent for the month. The gains brought wages and spending to 96 percent of their peaks reached in February.
Today’s employment report shows the number of private-sector jobs increased by 877,000 in September, a 0.7 percent increase from August. Total hours worked increased by 1.2 percent. This means the economy in September may have matched the strong 1 percent gain it experienced in August.
Another sign the economy continued to rebound in September was the strong performance reflected in the ISM’s survey of manufacturing. The overall index remained in the mid-50s, while new orders continued to register a strong reading of 60. The survey shows no increase in manufacturing jobs, but it also shows that job numbers were no longer declining. The high reading for new orders points to likely job increases in the future.
There was progress in weekly employment numbers during September. Initial unemployment claims at the end of the month were down only slightly from the beginning of the month. However, insured unemployment payments in mid-September went to 11.8 million, about 3 million less than in mid-August. The insured unemployment rate was 8.1 percent, down from 9.1 in mid-August.
What to Expect Next Week
The key report next week will be Monday’s ISM survey for service companies. The August report had an overall strong reading of 62 and a healthy reading of 57 for new orders. If September’s numbers are as good or better than August’s, it will suggest that the economy continued to perform better than some of the employment data might indicate.
Daily death rates from COVID-19 continue to trend lower, strengthening the rationale for states to reopen their economies further.
Given the type of year it’s been, President Donald Trump’s announcement that he and First Lady Melania tested positive for the virus seems to be par for the course. Futures markets fell 2 percent on the news. That followed gains of 5 percent this past week and losses of 4 percent the previous week.
Amid all this volatility, stock prices are where they were three months ago.
The CDC recently released its latest estimates of the chances of survival at 95 percent if a person over 70 gets COVID-19. The odds the president and First Lady will recover are much higher than 95 percent because they don’t have other health problems, and of course Melania is younger.
This development is not a reason to sell stocks. Stocks have been moving sideways for three months. The movement is constructive. It allows for the long-term upward trend in earnings to improve the valuation of stocks amid the market’s short-term volatility.