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The Fed has stated that its key focus on policy—the immediate issue being when to taper QE—is the labor market. The latest and delayed employment report (due to the government shutdown) showed a weaker-than-expected rise in payroll jobs, leaving markets with belief that the Fed will not taper soon.
 Equities posted somewhat strong gains this past week. However, stocks got off to a slow start on Monday, generally unchanged for the day. Many traders moved to the sidelines to wait for the results of the Tuesday’s delayed release of the September jobs report. Also, some were nervous that equity gains may be overextended after some lackluster earnings reports from McDonald's and others fed this concern.
 Stocks climbed Tuesday with the S&P 500 hitting a record high after September’s gain in payroll jobs was notably weaker than expected. The sluggish number was seen as keeping the Fed’s economic stimulus in place with no tapering soon. However, the jobs number was not seen as weak enough to derail the recovery.
However, equities declined notably at mid-week on disappointing earnings and forecasts. Standouts for cutting revenue and earnings projections included Caterpillar, Broadcom, and FMC Technologies, among others. But stocks rebounded Thursday on better than expected Chinese manufacturing data and earnings reports. The China flash manufacturing purchasing managers' index reading was a more-than-expected 50.9 from 50.2 in September, reflecting faster growth of both output and new orders. Favorable company results were posted by homebuilder PulteGroup and by Ford, each in key sectors.
Stocks ended the week on a positive note as company news on third quarter results were favorable, including for Microsoft (sales beat estimates) and Amazon.com (earnings were down less than expected and revenues topped forecasts). A dip in consumer sentiment and soft durables orders (outside of aircraft) supported belief that the Fed will not taper at this coming week’s policy meeting. At week’s close, the S&P 500 was at a record high.
Equities were up this past week. The Dow was up 1.1 percent; the S&P 500, up 0.9 percent; the Nasdaq, up 0.7 percent; the Russell 2000, up 0.3 percent; and the Wilshire 5000, up 0.8 percent.
For the year-to-date, major indexes are up as follows: the Dow, up 18.8 percent; the S&P 500, up 23.4 percent; the Nasdaq, up 30.6 percent; the Russell 2000, up 31.7 percent; and the Wilshire 5000, up 25.3 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 The story this past week is straightforward. Almost all of the action took place Tuesday after the weaker-than expected payroll jobs data. This resulted in traders seeing the Fed continuing asset purchases at the current pace of $85 billion a month in long-term Treasuries and mortgage backed securities.
Other sluggish economic news also weighed on yields, including a dip in consumer sentiment.
 At mid-week, the 10-year note’s yield fell to the lowest in three months.
Longer maturity yields have come down recently. This reflects the run up in rates due to taper fears ahead of the September FOMC meeting and then easing of yields after the Fed decided to not taper at the end of the September 17-18 FOMC meeting.
For this past week Treasury rates were down as follows: the 5-year note, down 5 basis points; the 7-year note, down 9 basis points; the 10-year note, down 8 basis points; and the 30-year bond, down 6 basis points. The 3-month T-bill was up 1 basis point while the 2-year note was unchanged.
 The spot price for West Texas Intermediate declined this past week on both higher supply and weaker expected demand.
Tuesday, WTI fell almost a buck and a half a barrel on concern that the government report on Wednesday would show a jump in stockpiles. Also, the sluggish employment report was seen as pointing to soft demand growth.
Crude slipped further on Wednesday when the EIA report showed supplies topping forecasts. At below $97 per barrel, crude was at the lowest level in almost four months. Prices nudged up somewhat on Thursday and Friday.
Net for the week, the spot price for West Texas Intermediate fell $2.96 per barrel to settle at $97.94.
At the Fed’s September policy meeting, FOMC members expressed concern about weakness in the recovery. This past week’s economic news largely was consistent with those worries—notably for the labor market.
 The payroll data and household numbers were mixed in September at the headline level but soft in detail. Markets were looking over their collective shoulder at the Fed. Total payroll jobs in September advanced 148,000, following a revised increase of 193,000 for August (originally up 169,000) and after a revised gain of 89,000 for July (previous estimate was 104,000). The consensus forecast was for a 184,000 gain for the latest month. The net revisions for July and August were up 9,000.
 The unemployment rate slipped to 7.2 percent after dipping to 7.3 percent in August. Analysts expected a 7.3 percent unemployment rate. But the improvement was largely related to a decline in the pool of available workers, affecting the number of unemployed.
Turning back to payroll data, growth in recent months has been on a slowing trend. Private payrolls gained 126,000, following an increase of 161,000 in August (originally 152,000). The median forecast was for a 184,000 rise.
Goods-producing jobs improved to a gain of 26,000 in September from a rise of 18,000 the prior month. Strength was in construction which jumped 20,000 while mining rose 3,000 and manufacturing edged up 2,000 (sector data are rounded).
Private service-providing jobs increased 100,000 in September after a 143,000 rise in August. The September advance was led by professional and business services (up 32,000), retail trade (up 21,000), and professional & business services (up 32,000). On a negative note, leisure and hospitality fell 13,000 while financial services dipped 2,000. The weakness in leisure and hospitality suggests a cutback in discretionary spending by the consumer.
Government jobs rose 22,000 in September after gaining 21,000 in August.
Wage growth eased in September, rising only 0.1 percent for average hourly earnings, following 0.2 percent the month before. On a year ago basis average hourly earnings were up only 2.2 percent—the same pace as in August. The average workweek held steady at 34.5 hours.
Looking ahead to the personal income report, from the payroll survey, private aggregate weekly earnings rose 0.3 percent in September, pointing to a moderate rise in private wages & salaries. Production worker hours in manufacturing fell 0.3 percent for the month, suggesting a decline in the manufacturing component for September industrial production.
 Details about the decline in the unemployment rate confirm the view of many at the Fed that it is not necessarily the best view of the labor market. The labor force rebounded 73,000 after dropping 312,000 in August. Household employment rebounded 133,000 after falling 115,000 in August while the number of unemployed dipped 61,000, following a 198,000 drop in August. However, the pool of available workers fell another 183,000 after a plunge of 532,000 in August—resulting in the fourth decline in a row. The supply of labor has been on a downtrend since late 2009.
Despite the improvement in the headline unemployment rate, September’s overall report points to a softening labor market, although there are mixed indications for various sectors in the economy. Construction employment is favorable for that sector while manufacturing likely will remain sluggish. The news for the consumer sector was mixed with retail trade jobs up but those in leisure & hospitality down. Also, wage growth is very weak. The September jobs report gives the Fed little reason to begin tapering its quantitative easing programs.
 October has not been an upbeat month for consumer spirits. The consumer sentiment index fell to 73.2 in the final October reading, down from 75.2 at mid-month and down from 77.5 in final September. The decline appears to have been building up steam with the implied reading for the second half of the month in the low 70s which is the lowest indication in 2 years.
The weakness was centered in the expectations component which fell to 62.5 vs 63.9 at mid-month and vs 67.8 in final September. The temporary resolution in Washington didn't give any boost with the implied reading for the last two in the low 60s and another 2-year low for this report.
 The consumer's assessment of current conditions is much less volatile, at 89.9 versus 92.8 at mid-month and versus 92.6 for final September. Still, the latest reading is going in the wrong direction and is not a positive indication for October's jobs market.
Some of the usual suspects are not behind the recent decline in sentiment. Gas prices are coming down and are pulling inflation expectations lower, to 3.0 percent for final October versus 3.3 percent for final September. The same reading for 5-year expectations is down 2 tenths to 2.8 percent. Also, mortgage rates have eased a bit in recent weeks.
Consumers often judge the economy based on their own prospects. The latest report suggests they are less than upbeat about the current jobs market and increasingly cautious about long-run prospects.
 Job openings have been on a decent uptrend, but the pace of actual hires continues to lag. There were 3.883 million job openings on the last business day of August, up from July at a revised 3.808 million. The job openings rate improved slightly to 2.8 percent from 2.7 percent in July.
The hires rate was unchanged at 3.3 percent in August while the separations rate edged up to 3.2 percent from 3.1 percent in July.
These series are somewhat volatile on a monthly basis. The average monthly change over the last three months is down 8,000 for openings, down 1,000 for hires, and down 2,000 for separations.
 The hires and separations trends remain on a lower trajectory than openings-indicating that firms are having a hard time finding qualified applicants. And meanwhile, hires are only modestly above separations.
Overall, the latest JOLTS report continues to point to a sluggish jobs market.
 Sales of existing homes have been flat the last couple of months, down 1.9 percent in September following a downwardly revised no change reading for August and held down by higher mortgage rates and a still cautious consumer. The annual rate, at 5.29 million, came in right on expectations.
Sales fell in 3 of the report's 4 regions with only the West showing a gain, and only a small gain following a decline in August.
Homes are not coming onto the market with supply at the current sales rate at 5.0 months versus 4.9 and 5.0 months in the two prior months. The lack of activity is being reflected in prices which are coming down with the median price down 5.0 percent to $199,200 following August's 1.3 percent decline.
Though monthly rates are on the decrease, year-on-year rates are still quite strong with sales up 10.7 percent and the median price up 11.7 percent. The housing market is still moving forward but not at robust rate.
 Home prices continue their uptrend but at a slower pace in August. The FHFA house price index for August rose 0.3 percent after jumping 0.8 percent in July. The August HPI is the 19th consecutive monthly price increase in the purchase-only, seasonally adjusted index.
The increase was led by a 1.3 percent gain in the Mountain region. The biggest decline was in the South Atlantic, down 0.5 percent. Seven of nine Census regions showed gains in the latest month while two decreased.
The year-on-year rate for August came in at 8.5 percent versus 8.6 percent in July.
The continued rise in home prices is providing support for the housing sector as more homeowners come out of being underwater. The gains also are a positive for consumer confidence—and the consumer mood needs help from wherever it can be obtained.
 The construction sector continues to lead the recovery currently. Construction spending in August advanced 0.6, following an increase of 1.4 percent in July (originally up 0.6 percent). Expectations were for a 0.4 percent boost in August. The upward revision to July may be the big story within this report.
The gain in August was led by private residential outlays which posted a 1.2 percent boost, following a rise of 0.3 percent the month before. While the multifamily subcomponent led the way, the single-family subcomponent also was strong.
Public spending on construction rose 0.4 percent after a 0.1 percent rise in July. Private nonresidential outlays edged up 0.1 percent but followed a strong 3.7 percent surge in July.
On a year-ago basis, construction was up 7.1 percent in August, compared to 6.2 percent the month before.
Construction now appears to be a relative bright spot in the economy and this may continue with the healthy rise in construction employment in September.
 Soft growth globally continues to hamper the manufacturing sector. New factory orders for durables jumped in September—largely on aircraft orders. But outside of transportation, durables orders were marginally negative, indicating that manufacturing is still sluggish.
New factory orders for durables in September surged 3.7 percent after edging up 0.2 percent in August The transportation component spiked 12.3 percent after an increase of 1.7 percent in August. The transportation surge came from nondefense aircraft with defense aircraft also being strong. Excluding transportation, durables orders slipped 0.1 percent, following a decline of 0.4 percent in August. Analysts forecast a 0.5 percent advance for September.
 Within transportation, motor vehicles slipped 0.3 percent, nondefense aircraft spiked a monthly 57.5 percent, and defense aircraft rebounded 15.2 percent.
Outside of transportation, gains were seen in primary metals and computers & electronics. Contraction was seen in fabricated metals, machinery, electrical equipment, and “other.”
Nondefense capital goods orders edged up 0.1 percent in September, matching the rise the month before. Shipments for this series declined 0.2 percent, following a rebound of 1.1 percent the month before. Overall, business investment in equipment outside of aircraft is sluggish, possibly due to slow economic growth and uncertainty over the government sector.
Going into the government shutdown, the manufacturing sector (outside of Boeing) was essentially flat. Soft employment numbers for manufacturing for September add to this view. But there is one sign of potential improvement ahead—PMI data for China have been more positive, suggesting pending gains in global demand.
Composite activity in the manufacturing sector has slowed in October according to Markit Economics' PMI flash index which is at 51.1, compared to September's mid-month and final readings both of which were 52.8. The key component of the composite is the new orders index which likewise shows slowing, down about a point and a half to 51.6. Backlog orders rose slightly to a marginal build at 50.5.
Prior softness in new orders is taking the starch out of current output, which at 49.5 actually contracted compared to September. This is the first sub 50 reading for output of the recovery. Employment, at 52.3, is not likely to break higher given the lack of strength in orders and lack of output. Inventories of both raw materials and finished goods are contracting.
Prices, however, are not coming down showing monthly increases for both inputs and outputs.
 Manufacturing activity in the Richmond Fed district was sluggish in October while that in the Kansas City Fed district was somewhat positive.
Composite activity has been flat in October in the Richmond Fed's manufacturing region, at a reading of 1 versus 0 in the September report. New orders, at 0 versus 5 in September, point to flat activity for the next report as well. Shipments are at minus 2 while employment jumped to 4 from minus 6. But given the weakness in orders and shipments, the employment index is not likely to begin much of a climb going into year end.
The six-month outlook is a positive in this report as it is in many manufacturing reports, though optimism did ease back with the index at 30 for a 9 point decline. The region's manufacturers see slowing ahead in hiring and capital investment though they see their backlogs building and see capacity utilization increasing.
 Growth in manufacturing activity in the Kansas City district improved moderately in October, while producers' expectations for future activity eased somewhat but remained at solid levels. According to the Kansas City Fed, several producers noted negative business impacts from the government shutdown, particularly related to delays in government inspections and approval processes, lack of data availability, and overall customer uncertainty. The month-over-month composite index was 6 in October, up from 2 in September but down from 8 in August. The production index jumped from 4 to 14, and the shipments and new orders for exports indexes also increased. In contrast, the order backlog index was unchanged, and the new orders and employment indexes eased for the second straight month. The raw materials inventory index rose from 0 to 12, and the finished goods inventory index also moved higher.
Most future factory indexes eased somewhat after rising markedly last month. The future composite index fell from 18 to 8, and the future production, shipments, and new orders indexes also decreased. The future employment index moved from 14 to 3, its lowest level since January, while the future capital expenditures index was unchanged.
The third quarter is ending on a soft note except for construction. Unfortunately, early signs for the fourth quarter show little improvement in growth. For now, the recovery largely is being supported by low interest rates—thanks to the Fed’s asset purchase programs. And the latest economic news has markets convinced that the Fed will continue its monthly bond purchases of $85 billion.
Again, the Fed takes center stage. On Wednesday the Fed will announce whether it is going to start tapering bond purchases. The consumer sector is the next focus. Retail sales and motor vehicle sales softened recently and updates for September and October, respectively, are scheduled. Also, we get an early peek at the possible payroll number with this week’s ADP report. Key numbers for manufacturing and housing also hit the wires.
Industrial production posted a 0.4 percent increase in August, following no change in July (originally unchanged). The manufacturing component jumped 0.7 percent, following a 0.4 percent decrease in July. Gains were broadly based but led by motor vehicles. Excluding motor vehicles, manufacturing rebounded 0.4 percent after a 0.1 percent dip in July. The output of utilities fell 1.5 percent in August, following a 1.3 percent decline the prior month. This was this component’s fifth consecutive decrease. Production at mines advanced 0.3 percent after a 2.4 percent jump the month before. Mining activity has increased five months in a row. Capacity utilization for total industry rebounded to 77.8 percent from 77.6 percent in July. Looking ahead, >production worker hours in manufacturing fell 0.3 percent for the month, suggesting a decline in the manufacturing component for September industrial production.
Industrial production Consensus Forecast for September 13: +0.4 percent
Range: +0.1 to +0.8 percent
Manufacturing production component Consensus Forecast for September 13: +0.3 percent
Range: +0.2 to +0.4 percent
Capacity utilization Consensus Forecast for September 13: 78.0 percent
Range: 77.7 to 78.4 percent
The pending home sales index declined 1.6 in August, following a 1.4 percent decline in July. The pending home sales index was at the lowest level since April and followed a rush of gains that the National Association of Realtors (NAR) tied to rising rates as nervous buyers rushed into the market before rates moved even higher. The NAR, in a downbeat outlook, sees slower sales ahead along with tight inventory and higher prices. However, the outlook might improve as rates have eased a bit after the Fed chose not to taper in its policy decision on September 18.
Pending home sales Consensus Forecast for September 13: 0.0 percent
Range: -2.0 to +3.5 percent
The Dallas Fed general business activity index in September jumped nearly 8 points to 12.8, its highest reading in a year and a half. The company outlook index posted a fourth consecutive positive reading and came in at 7.9, little changed from August. The production index, a key measure of state manufacturing conditions, rose from 7.3 to 11.5, suggesting output increased at a slightly faster pace than in August. Other measures of current manufacturing activity indicated continued growth in September. The capacity utilization index rose 6 points to a reading of 10.7. The new orders index was 5, largely unchanged from its August level. The shipments index edged down from 11.4 to 10.3.
Dallas Fed general business activity index Consensus Forecast for October 13: 9.0
Range: 8.0 to 15.9
The producer price index in August rose 0.3 percent after no change in July. The core rate, which excludes both food and energy, was flat after a 0.1 percent rise in July. Food prices jumped 0.6 percent after being flat in July. Energy surged 0.8 percent, following a 0.2 percent dip the prior month. Gasoline prices spiked 2.6 percent after decreasing 0.8 percent in July. Weakness in the core included a 0.5 percent decline in prices for passenger cars and a 0.3 percent decrease for light trucks.
PPI Consensus Forecast for September 13: +0.2 percent
Range: -0.2 to +0.4 percent
PPI ex food & energy Consensus Forecast for September 13: +0.1 percent
Range: 0.0 to +0.2 percent
Retail sales increased 0.2 percent in August after a 0.4 percent gain the month before. This was the weakest gain in four months. However, autos jumped 0.9 percent after a 0.5 percent dip in July. Retail sales excluding autos edged up 0.1 percent, following a 0.6 percent rise the month before. Gasoline sales were flat, following a 0.7 percent spike in July. Excluding the auto and gasoline components, sales nudged up 0.1 percent, following a 0.6 percent boost in July.
Retail sales Consensus Forecast for September 13: 0.0 percent
Range: -0.4 to +0.5 percent
Retail sales excluding motor vehicles Consensus Forecast for September 13: +0.3 percent
Range: 0.0 to +0.9 percent
Less motor vehicles & gasoline Consensus Forecast for September 13: +0.3 percent
Range: +0.1 to +1.0 percent
The S&P/Case-Shiller 20-city home price index (SA) was up 0.6 percent in July, but down from 0.9 percent gains in the prior two months and down from 1.7 and 1.9 percent gains in the two months before that. But the year-on-year adjusted rate, at plus 12.3 percent, was up 3 tenths for a new recovery high. If the latest Case-Shiller follows movement in the August FHFA index, there could be some deceleration as this index decelerated to a rise of 0.3 percent after jumping 0.8 percent in July.
The S&P/Case-Shiller 20-city HPI (SA, m/m) Consensus Forecast for August 13: +0.7 percent
Range: +0.3 to +1.0 percent
The S&P/Case-Shiller 20-city HPI (NSA, m/m) Consensus Forecast for August 13: +0.8 percent
Range: +0.8 to +1.3 percent
The S&P/Case-Shiller 20-city HPI (NSA, y/y) Consensus Forecast for August 13: +12.4 percent
Range: +11.7 to +12.9 percent
Business inventories rose 0.4 percent in July for the highest increase since January but the build slightly trailed a 0.6 percent rise in business sales in a favorable mix that pulled down the stock-to-sales ratio to a leaner 1.28 versus 1.29 in June.
Business inventories Consensus Forecast for August 13: +0.3 percent
Range: +0.2 to +0.5 percent
The Conference Board's consumer confidence index in September dipped 2.1 points to 79.7. However, there were some positives. The present situation component was up 2.3 points to 73.2 which, next to July's 73.6, is the best reading of the recovery. Those saying jobs are currently hard to get, which is a closely followed reading, was down 6 tenths to a new recovery low of 32.7 percent. Additionally, there was a 2 tenths gain to 11.5 percent for those that describe jobs in the current market as plentiful.
Consumer confidence Consensus Forecast for October 13: 75.0
Range: 70.0 to 79.0
ADP private payroll employment ADP reported a weaker-than-expected rise in private payroll growth at 166,000 in September. For the same month, the BLS reported a 126,000 gain in private payroll jobs.
ADP private payrolls Consensus Forecast for October 13: 138,000
Range: 100,000 to 160,000
The consumer price index in August posted a 0.1 percent rise, compared to July’s 0.2 percent and June’s 0.5 percent. The core CPI—excluding food and energy—edged up 0.1 percent after rising 0.2 percent the month before. By major components outside the core, energy declined 0.3 percent after edging up 0.2 percent in July. Gasoline slipped 0.1 percent, following an increase of 1.0 percent the prior month. Food edged up 0.1 percent, matching the pace in July. For the core measure, softness was seen in several areas. The new vehicles index, which rose in June and July, was unchanged in August, while the recreation index was unchanged for the second straight month. The index for airline fares declined sharply in August, falling 3.1 percent. This was the third consecutive decline for the index, but it has still risen 1.5 percent over the past 12 months. The indexes for used cars and trucks and household furnishings and operations both declined slightly in August, falling 0.1 percent.
CPI Consensus Forecast for September 13 +0.2 percent
Range: +0.0 to +0.3 percent
CPI ex food & energy Consensus Forecast for September 13: +0.2 percent
Range: 0.1 to +0.2 percent
The FOMC announcement at 2:00 p.m. ET for the October 29-30 FOMC policy meeting is expected to leave policy rates unchanged. Market focus will be on the FOMC’s characterization of the economy—especially the labor market—and on any hints on timing of the start of reducing quantitative easing.
FOMC Consensus Forecast for 10/30/13 policy vote on fed funds target range: unchanged at a range of zero to 0.25 percent
Initial jobless claims are coming down, thanks to the easing of special factors. However, initial jobless claims remain high, at 350,000 in the October 19 week. Claims hit peaks of 362,000 and 373,000 in the two prior weeks which were inflated by the government shutdown and backlog counting problems in California. The 4-week average for the October 19 week is at 348,250 which is a big 40,000 or so above the comparison with mid-September—which was before the shutdown and the counting problem.
Jobless Claims Consensus Forecast for 10/26/13: 335,000
Range: 328,000 to 345,000
The Chicago PMI accelerated in September to 55.7 versus August's 53.0. New orders rose 1.7 points to 58.9 to indicate the strongest rate of monthly growth since February. But it is production that contributed most to the acceleration in September's composite with this component jumping 5.0 points to 58.0 for the best rate since May. A negative in the report is continued moderate contraction in backlogs which are below 50 for a 4th straight month at 46.7.
Chicago PMI Consensus Forecast for October 13: 55.0
Range: 51.0 to 57.0
Sales of total light motor vehicles fell a sharp 5.1 percent in September, following a 1.8 percent rise the month before. September's 15.3 million annualized sales pace was up 3.4 percent on a year ago basis. September's drop was led by domestic trucks, down a monthly 7.3 percent, with domestic cars down 5.1 percent. Import cars slipped 1.0 percent but import trucks edged up 0.4 percent. Sales of domestic vehicles stood at 11.8 million in September, compared to 12.6 million in August.
Motor vehicle domestic sales Consensus Forecast for October 13: 11.9 million-unit rate
Range: 11.6 to 11.9 million-unit rate
Motor vehicle total sales Consensus Forecast for October 13: 15.4 million-unit rate
Range: 15.0 to 15.8 million-unit rate
The Markit PMI manufacturing flash index slowed in mid-October to 51.1 versus September's mid-month and final readings both of which were 52.8. The key component of the composite is new orders which likewise showed slowing, down about a point and a half to 51.6. Backlog orders rose slightly to a marginal build at 50.5.
No consensus numbers are available for this month’s report
The composite index from the ISM manufacturing survey showed modest acceleration during September to 56.2 from 55.7 in August. This was the best reading since early in the recovery when comparisons against soft rates of growth made for magnified gains. The new orders index, which is a leading indicator, slowed but not much and was still at a very strong rate of monthly growth and above 60 for a second month at 60.5 versus August's 63.2. Other order readings were less positive with new export orders down 3.5 points to 52.0 while backlogs remained in contraction though just barely at 49.5 for a 3 point improvement from August. Production rose 2 tenths to 62.6, which is a third straight 60 reading.
ISM manufacturing composite index Consensus Forecast for October 13: 55.0
Range: 52.5 to 57.0
R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books.
Econoday Senior Writer Mark Pender contributed to this article.
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