Succinct Summation of Week’s Events:
1) US economy added 248k net new jobs in September; two prior months were revised up by a total of 69k.
2) Unemployment rate falls two tenths unexpectedly to 5.9%, the lowest since July ’08. Average weekly hours ticks up to 34.6, the most since May ’08.
3) Initial Jobless Claims fell to 287k from 295k last week (revised from 293k). 4 week average is 295k vs 299k, 2nd lowest level since 2006. Continuing Claims fell by 45k to also the lowest level since 2006.
4) S&P/CS home prices in July fell .50% m/o/m, but increased y/o/y by 6.75%. Yearly increase was slowest since December ’12.
5) US income growth rose .3% m/o/m in August, in line and spending grows by .5%, one tenth more than expected. The savings rate ticks down to 5.4% from 5.6%.
6)The US trade deficit in August falls to the lowest since January as exports rise to a record level.
7) September CPI in the euro zone rose .3% y/o/y (driven by energy prices which fell 2.4%) vs .4% in August and the core rate unexpectedly moderated to a .7% gain vs the estimate of .9%. The European populace doesn’t need a higher cost of living right now notwithstanding the best attempts of the ECB to bail out the over indebted.
1)As of this writing, the S&P 400 Midcap index joins the Russell 2000 below its 200 day moving average for the first time since November 2012.
2) What’s the Fed going to do now with a 5.9% unemployment rate (already at their 2014 year end estimate) and still zero interest rates? Asset prices at 6 year highs after ZIRP
3) Labor participation rate falls to 62.7%, lowest since February 1978 proving again that this is not a cyclical phenomenon. Wages were flat m/o/m and up 2% y/o/y
4)Vehicle sales in September moderate to a 16.34mm SAAR vs 17.45mm in August and the estimate of 16.8mm.
5) The September ISM manufacturing index fell to 56.6 from 59 in August and was below the estimate of 58.5. From the ISM, “comments from the panel reflect a generally positive business outlook, while noting some labor shortages and continuing concern over geopolitical unrest.”
6) Mortgage applications were virtually unchanged as refi’s fell .3% and purchases were flat w/o/w but with still 34% and 11% y/o/y declines respectively.
7) Pending home sales in August fell 1% m/o/m and 4.1% y/o/y vs expectations of down .5% and 1.4% respectively.
8) China’s services PMI falls to an 8 month low in September and new orders drops below 50 for the first time since December ’08. China’s main manufacturing PMI was unchanged at 51.1 but 5 month lows were seen in new orders and backlogs.
9 )If Mario Draghi cannot get guarantees from individual European government on mezzanine ABS that he wants to buy, then just buying the senior slice will not get him anywhere close to the balance sheet goal he has and also won’t do much to jump start bank lending.
10)The August unemployment rate for the EU remained unchanged at a still very elevated 11.5% for a 3rd month although its down from its peak of 12%.