Economic Update 11-21

Finally, after 43 days, the U.S. Government is now open and we saw the first significant economic release yesterday morning. Initially, we were told both the September and October employment numbers would be announced. However, only the September numbers were released, and the October numbers are now set to be given in December along with the November payroll figures. As we all have seen, no one won with the government being shut down for such an extended period, and it is taking time for things to return to normal. Hopefully, the release of the economic figures we like to follow and observe will return to a more consistent pattern.

Given the above, The U.S. Nonfarm Payrolls grew by 119,000 in September. This compared quite favorably to the decline of 4,000 jobs in August and was the strongest growth in employment since April of this year. As we have seen throughout this year, healthcare was the largest sector for job growth. Restaurants and bars were also significant contributors to employment gains. Unfortunately, the Manufacturing sector lost about 6,000 jobs during the month. This reversed a fairly positive trend for this sector. Considering the new monies being committed for manufacturing in the U.S., I think this reversal is only temporary.

One of the more positive aspects of the September numbers was that private businesses added 97,000 new jobs during the month. This was the largest gain in five months. Average Hourly Earnings on a year-over-year basis rose by 3.8%. This matched the August level and was 0.1% above the consensus estimate. The average workweek remained at 34.2 hours, which indicates a significant portion of the new jobs added were part-time. Interestingly, though, the average workweek for the manufacturing sector was 39.9 hours. This means virtually all employment for this sector is full-time.

Considering the limited amount of economic information we are receiving, many Fed members are voicing their frustration as they look ahead to their December meeting on the 9^th and 10^th.  The potential still exists, in my view, for an additional cut in the Federal Funds Rate at this meeting before year-end. I think the financial markets, equities in particular, will respond to their announcement at the conclusion of the meeting on December 10^th.

One additional point I will offer as we approach year-end. We are in the middle of earnings season, and companies are reporting their financial results for the third quarter. Generally, most of our holdings have been reporting both revenue and earnings above forecasted levels. This is a positive sign for investors as they look to either buy or sell individual securities. We continue to hold our equity positions and have added to fixed-income levels when funds are available.

Hopefully, we will have a more normal period of economic releases in the coming weeks, and our updates will be more timely. However, we are entering the always important Holiday Season. We wish you and your family a blessed Thanksgiving next week and an especially wonderful beginning to the Christmas season.