Macro Commentary
Where have all the good job gains gone? After a wage report earlier this week that showed incomes in the US increasing 3.2% year-over-year, the jobs report released this morning was a bit more disappointing. Not only did the non-farm payrolls increase less than forecasted (+142k vs. an expectation over +200k) but prior month reports were revised down. The one glimmer of good in an otherwise “blah” report was that the under-employment rate (which includes discouraged and part-time for economic reason workers) continued its decline towards 10% from a peak near 17% just after the financial crisis. Granted, 10% was the peak after the prior recession of 2001 so there is still room for improvement. Perhaps these were the numbers that the Fed was looking at when they decided not to raise in September. We must be careful not to make too much of any one report. The trend is what matters more, and the trend remains that jobs are being created, wages are increasing, and consumer confidence is still strengthening.
The equity market opened down with the news, but after a little time to settle started to climb to once again end the day higher. This week saw the end of a very difficult third quarter across all risk assets. Some unusual trade activity occurs around quarter-ends as investors “window dress” their portfolios for reporting purposes. This cycle was made even more volatile by the lack of liquidity as traders sought to sell their losing positions without many willing to take the other side of the trade. After September 30th, we saw a bounce from oversold conditions especially in some niche areas where there is less market depth. We are now entering the fourth quarter where seasonally speaking the equity market tends to perform better, but all eyes will turn back to earnings and the lingering question of future growth.