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October Monthly Economic Update

Investors had plenty of news to absorb in September: the latest monetary policy statement from the Federal Reserve, the Wells Fargo fiasco and the crisis involving Deutsche Bank, and a major deal forged between OPEC member nations. Add in the presidential race and a raft of economic data, and you had all the ingredients for market turbulence. Wall Street saw much of that last month. Yet, at the close on September 30, the S&P 500 was little changed from the end of August – the index was just 0.12% lower. The latest housing indicators showed fewer home sales and less groundbreaking; hiring tapered off, and news came that the manufacturing sector had abruptly contracted. Even so, consumer confidence strengthened. (1)


Would the Federal Reserve raise the key interest rate in September? As it turned out, no. The Fed elected to postpone a rate hike, a decision in line with market expectations. The 7-3 vote was, however, unusually close, and the latest Fed dot-plot indicated consensus for a rate increase before the end of the year. At the press conference following the release of the Federal Open Market Committee’s statement, Fed chair Janet Yellen noted that the FOMC is “generally pleased with how [the] economy is doing.” (2)

Main Street seemed to share that feeling as well. Both of the key consumer confidence polls ended September higher. The University of Michigan index went from 89.8 at the end of August to a final September mark of 91.2, while the Conference Board’s gauge went north 3.0 points to a very strong reading of 104.1. (3,4)

These numbers may hint at stronger personal spending. The Department of Commerce’s September report on that subject will arrive late this month; the August data left something to be desired. Personal spending was flat in the eighth month of the year even as personal incomes rose 0.2%. August retail sales fell 0.3%, with the retreat at 0.1% minus gasoline and auto purchases. August brought a 0.2% advance for the Consumer Price Index, with core prices rising 0.3%; in annualized terms, America had experienced 2.3% core consumer inflation in the past 12 months. (3,4)

The August jobs report from the Department of Labor looked pretty mediocre: the net job gain was 151,000. As unimpressive as this was, the 3-month moving average for job growth was much better at 232,000. Year-over-year wage growth came in at 2.4% in August, as opposed to 2.7% a month earlier.

The unemployment rate remained at 4.9%; the U-6 rate including the underemployed stayed at 9.7%. (5)

In late September, the Bureau of Economic Analy