The week ended on a favorable note given that the employment situation was slightly better than expected. The stage is set for decent income news later this month. The factory payroll figures point to a sluggish industrial production figure for August, however. Yet, the labor market situation did not deteriorate in August and that was the main point. Many economists felt that the Fed would simply have had to cut the federal funds rate target in September if nonfarm payrolls had contracted instead of increasing slightly. The slight down tick in the jobless rate, even if not considered statistically significant, is a bonus.

One can't discount the surge in motor vehicle sales. Consumers may appear less optimistic given the confidence surveys, but when they plunk their money down on $20,000 or $25,000 or $30,000 vehicles, that just ain't so. Consumers may be somewhat more cautious these days, but as long as income grows, so will spending. Lower interest rates are helping too.

The ISM indexes were disappointing as they tumbled from July levels, but they remained above the key 50 percent mark. Furthermore, the rise in factory orders follows declines, but the trend is definitely on the upswing.

All in all, market players are grudgingly coming to the realization that the Fed is not likely to cut rates at the September FOMC meeting. Some bond investors may still expect a rate cut later this year. But more economists are stepping up to the plate and predicting that the next Fed rate change will be an increase rather than a cut, even if it isn't until 2003.