A Macro View – October Monthly Recap
Chart of the Week
- October’s employment report is strong across the board. The Department of Labor estimates that 250,000 new jobs were created in October. Every industry group added new jobs, including the beleaguered retail sector. Hourly wages were up 0.2% in the month and, notably, crossed the psychologically important 3.0% level for the trailing 12 months. The strong overall report, and particularly the solid wage growth, makes a December rate hike by the Fed all but certain.
- Businesses paying more for employees. With unemployment at 50-year lows, the cost of adding and retaining employees is rising. The Employment Cost Index (ECI) rose 0.8% in the third quarter and 2.8% over the last year. The ECI includes salaries and hourly wages as well as benefits.
- Inflation remains tame. The Commerce Department reported the Personal Consumption Expenditures inflation index was up just 0.1% in September and 2% for the trailing 12-month period. Core inflation was up 0.2% for the month and the same 2% for the trailing year.
US and global equities rallied this week after a very disappointing October. US small caps were up 4%, and large caps rose roughly 3%. Europe also rallied more than 3%. Latin America was the laggard for the week, up a little more than 1%, despite a rally of more than 11% in Argentina and nearly 3% in Brazil.
Treasury yields move higher. Treasury yields were four to six basis points higher through Thursday for maturities greater than one year. Friday’s jobs report pushed yields another four to five basis points higher.
The US Dollar Index ended the week slightly lower. The index rallied through the middle of Wednesday, then sold off sharply Thursday, erasing the week’s gains.
Crude oil had its worst week since February, down roughly 2.5%, as the US is expected to announce exemptions for eight countries to continue buying oil from Iran, after US sanctions are applied later this year.
Among other economic data released this week: Housing prices were nearly unchanged for the three month period ending August and up 5.5% for the trailing year. Motor vehicle sales topped 17.5 million in October, slightly higher than in September and the best monthly number since last November.
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