Chief Economist Scott Brown discusses the latest market data.
Equities oscillated on several factors, including worries about China and developments in Washington. Lawmakers reached an agreement to avoid a government shutdown for the time being, extending borrowing authority through December 3. There was no agreement on infrastructure spending or the debt ceiling.
The economic data releases were generally unsurprising. However, inflation-adjusted consumer spending (68% of gross domestic product) is now tracking at about a 0.5% annual rate in 3Q21, sharply lower than in the first and second quarters (+11.4% and +12.0%, respectively). Durable goods orders were strong in August, boosted by a surge in civilian aircraft orders. The ISM Manufacturing Index showed strength in new orders and production but also reflected ongoing supply chain issues. The Conference Board’s Consumer Confidence Index weakened further.
Next week: The September employment report, the last before the November 2 to 3 FOMC meeting, arrives Friday. As Fed Chair Powell noted, “it wouldn’t take a knockout, great, super-strong employment report” to meet the test for tapering. A “reasonably good” report would suffice. The delta variant was likely a restraint on job growth, but a temporary one. Seasonal adjustment is often an issue in September – we normally add around 1.5 million (unadjusted) education jobs and lose about a million (unadjusted) jobs outside of education.