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Employment rebounds
The week's key report was released on Friday,
with new Labor Department data on the September employment
situation indicating an improved payroll picture, as was
expected. Coupled with Thursday's unemployment report,
the two releases
painted a benign employment situation. In other news,
activity in the manufacturing and services sectors slowed,
and factory orders declined; consumer credit remained
healthy. For the week, the S&P 500 Index rose 2.0% to 1,557
(and has earned a year-to-date total return of 11.4%). The
yield of the 10-year U.S. Treasury note rose 7 basis points
to 4.64%.
Manufacturing slowed
In September, manufacturing continued to
expand—though at a slower rate—as the Institute for Supply
Management (ISM) Index of manufacturing activity dropped to
52.0 from 52.9 the previous month. This marked the third
consecutive month of declines for the index, which now
stands at its lowest level since March. Weak numbers on core
capital goods orders and shipments indicated weaker output,
as new orders and production grew more slowly. While the
report suggested a slowing in manufacturing, the sector is
holding up despite ills elsewhere in the economy, especially
in housing.
Nonmanufacturing activity eased
The ISM Non-Manufacturing Index also showed a
slight decrease for September, dropping to 54.8 from the
prior month's 55.8. The report showed that employment
activity in the nonmanufacturing sectors increased during
the month, as did prices, which saw a big rise. The report
came in above consensus expectations and suggested that,
overall, the outlook for the services sector remains sunny,
though activity may be muted for the rest of the year.
Factory orders fell
In August, factory orders dropped a
larger-than-expected 3.3%, wiping out most of July's 3.4%
increase. Durable-goods orders sank 4.9%, while
nondurable-goods orders posted a 1.6% decline, the largest
since January. A decline in oil and coal shipments, driven
by August's sharp drop in oil production, accounted for most
of the weakness in durable goods.
Payroll picture improved
Two reports from the Labor Department painted
an improved employment picture, relieving fears of an
economic downturn within the financial markets. Thursday's
release showed initial
jobless claims for the week ended September 29 increasing to
317,000 from an upwardly revised 301,000 the previous week,
bringing claims back in line with expectations. Aside from
the occasional spike, during the year jobless claims have
remained essentially flat.
Friday's employment situation report showed
that employment growth rebounded in September, with a net
job gain of 110,000. In addition, August's report of 4,000
jobs lost underwent a major revision, showing an ultimate
gain of 89,000. Public-sector employment, which had dragged
the preliminary numbers down, actually rose in both August
and September. Gains also continued in September for service
industries, suggesting that spillover from the housing
downturn remains largely contained, and private-sector
employment as a whole increased. Overall, the unemployment
rate rose very modestly in September to 4.7%, from 4.6% in
August.
Consumer credit increased
In August, consumer credit increased $12.2
billion, or an annualized 5.9%, to $2.5 trillion. A report
released by the Federal Reserve showed that the latest hike
was driven by an upswing in revolving credit, which rose
8.4% in August on the heels of July's 7.7% gain. Rebounding
auto sales during August also helped to increase demand for
non revolving credit, which was up 4.8%. |
