Below are the economic and market highlights for the week:
- October nonfarm payrolls increased by 12,000, down sharply from September and below the Dow Jones estimate for 100,000. However, the Bureau of Labor Statistics (BLS) noted November’s results were impacted by the Boeing strike subtracting 44K jobs in the manufacturing sector, while hurricanes also likely held back job growth. The unemployment rate held steady at 4.10%. Meanwhile, wage growth remained robust, up 0.40% for the month.
- The U.S. economy grew at a 2.80% pace in the third quarter. That was below estimates of 3.10% and Q2’s 3.00%. Consumer spending and government outlays were the two of the biggest contributors to GDP growth, up 3.70% and 9.70%, respectively. That helped offset a higher trade deficit and smaller increase in inventories, or unsold goods.
- The Fed’s preferred inflation gauge, the personal consumption expenditures price index, rose 0.20% in September, bringing the 12-month inflation rate to 2.10%. However core inflation, which excludes food and energy, remained sticky, up 0.30% month-to-month. Services prices drove the increase, up 0.30% while goods prices fell -0.10%.
October Served Investors Tricks – Not Treats – as Markets Dip
There were more tricks than treats for investors in October as all three major indices finished the month lower. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite index fell -1.34%, -0.99%, and -0.52%, respectively. Mixed Q3 corporate earnings and rising treasury yields led traders to take gains off the table. This week, it was more mixed news for corporate earnings with Mag 7 members Microsoft and Meta failing to impress investors as they both gave weaker than expected projections for revenue growth. However, stocks rallied strongly on Friday as fellow tech giant Amazon beat analyst estimates on strong cloud and advertising growth. On the macro front, economic momentum remained strong as the consumer, who accounts for roughly two-thirds of output, continued to spend freely. Consumer spending registered its strongest quarterly print since Q1 2023, rising 3.70% in the third quarter. Markets also digested the October payrolls report this week. The jobs market added only 12K new hires. However, the report contained significant “noise” due to the on-going Boeing strike and Hurricanes Helene and Milton. The BLS even noted “it is not possible to quantify the net effect” of the storms on the jobs total. The Fed is sure to take note that October’s report was very much an outlier when it holds its Fed meeting next week. The central bank is widely expected to cut rates another 25 bps, which was reinforced by the weak October payroll number. However, it could pause in December and reconsider its rate projections if the economy continues its upward momentum. The case for a pause is growing based on the fact that the consumer is still strong, overall inflation is cooling (albeit core inflation is still above 3%), and wages are continuing to grow at a rate north of 4%. Add to that the uncertainty around the policies of either of the presidential candidates and the Fed very well could take a “wait and see” approach. Next week’s Fed meeting should be routine with the Fed sticking to its “data dependent” script. The good news if you are Jerome Powell is that markets are going to be far more focused on the aftermath from Tuesday’s election melee than anything he is likely to say.
The Week Ahead
A big week for markets with the election, Fed Meeting, ISM Services, and Consumer Sentiment on tap.
Daylight Saving Time Ends this Sunday, November 3, 2024
This Sunday marks the end of Daylight Saving Time (DST). The good news is the majority of Americans will get back the hour of sleep we lost in March. After clocks “fall back” at 2 a.m. local time on Sunday, November 3rd, it will be lighter earlier in the morning and darker earlier in the evening. Germany has been credited with initiating DST in 1916 in the hopes it would save energy during World War I. The first U.S. Daylight Saving Time went into effect in March 1918 for the same fuel saving argument, however, the U.S. Chamber of Commerce, a major supporter of the policy, also believed that Americans getting off work while it was still light outside would be more likely to go out shopping in the evening, thus giving the economy a boost.
The fuel savings did not materialize, and Congress repealed the act in 1919, reinstated it during World War II, and then made it a state and local decision whereby individual localities could decide whether and when to move forward or back, creating no uniformity and much confusion. In recent years, policymakers have debated this timeworn tradition, and a slew of bills on the federal and state levels have taken aim at the biannual changing of the clocks. The National Conference of State Legislatures reports that more than 550 bills and resolutions have surfaced concerning time changes at the state level in recent years. Currently, individual states can choose whether to observe DST but cannot adopt DST permanently without permission from Congress. States that adhere to DST must agree to change the clocks at a specified time and day or stick with standard time throughout the year in accordance with federal law. States that do not follow DST and instead follow a permanent standard time include Arizona, Hawaii, Guam, American Samoa, Puerto Rico and the U.S. Virgin Islands.
In 2022, the Sunshine Act was passed unanimously in the Senate which would stop the changing of the clocks and make DST year-round instead of eight months, but the bill was not taken up in the House. The bill was reintroduced in 2023, but it is similarly stuck in legislative limbo. One of the biggest challenges with locking the clock is choosing which time standard should be permanent between a year-round DST (YRDST) or a year-round standard time (YRST). Proponents of YRST argue that earlier morning daylight is better for our health and safety, aligning with circadian rhythms and facilitating safer mornings for children headed to school and workers who commute. YRDST favor more sunlight in the evening hours. Research shows that Americans don’t like changing their clocks but only time will tell if we can agree on whether we spring forward permanently or fall back forever.