As Investors Reflect on Fed Meeting, September Jobs Report Awaits

Oct 01, 2018
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Jobs Report and ISM Surveys to Balance Fed Meeting Reflections

This week provides an opportunity to reflect on the FOMC meeting while we await first-tier September economic releases. The ISM Manufacturing Survey will be later this morning with a slightly lower print versus August expected while the Non-Manufacturing Survey will be Wednesday and that’s expected to be a near repeat of the solid August survey. Those two September releases, however, are just the hors d’oeuves to the entrée which is the September Employment Report. The key metric, as has been the case lately, will be average hourly earnings as consumers, investors, and the Fed look for evidence that the uptick noted in August report will have some follow-through in September as a tightening labor market leads to higher wages.



Short-Term Rates

Short-term Rates

Economic Calendar

Economic Calendar


Top Events of the Week Top 5 Events for the Week

OCT 1-5,  2018

1.  September Employment Report — Friday
2.  September ISM Manufacturing Survey — Monday
3.  September ISM Non-Manufacturing — Wednesday
4.  August Trade Balance — Friday  
5.  August Factory Orders — Thursday


1.  September Employment Report — Friday

The September jobs release is expected to be another solid report but with a slight dip from the August headline jobs print with monthly job growth of 182,000 versus 201,000 the prior month with the unemployment rate ticking lower to 3.8% from 3.9%. The monthly average gain in jobs over the last year has been 194,000 so September is expected to be just under the annual average.  Once again, average hourly earnings will be the key metric and it’s expected to increase 0.3% MoM versus 0.4% in August.  Year-over-year average hourly earnings are expected to tick down to 2.8% from the solid 2.9% in August indicating the upward movement in wage gains noted in August is mostly sticking but not showing additional momentum.   The average over the past year has been 2.7%YoY, so a slightly above-average print is expected. In summary, this report should keep the Fed confident its rate hikes are not harming the labor market.


2.  September ISM Manufacturing Survey — Monday

The August ISM Manufacturing Survey is due later this morning followed by the non-manufacturing, or services, survey on Wednesday.  Between these two reports, and the jobs report on Friday, we’ll have a good feel for the level of economic momentum in the final month of the quarter. The manufacturing survey is expected to print 60.0 versus 60.3 in August.  The average over the past year has been 59.3 so the September result should show a slight decrease versus the yearly average, but anything above 50 represents expansion so the survey is likely to show continued strength in the manufacturing sector, albeit with some recent moderation.


ISM Manufacturing and Non-Manufacturing


3.  September ISM Non-Manufacturing Survey — Wednesday

The non-manufacturing (services) survey, which encompasses around 90% of the economy, is due Thursday and the forecast is for it to move slightly lower to 58.0 versus 58.5 in August. The average over the past year has been 58.3 so a slight miss on the twelve-month average but above 50 which indicates the sector continues to expand, albeit with some moderation just as is the case with the manufacturing survey.


4.  August Trade Balance — Friday

With trade war rhetoric remaining front and center the monthly look at trade deficits has become equal parts political and economic.  The trade deficit (goods and services) was -$42.8 billion in August 2017 and is expected to be –$53.5 billion in August 2018. The deficit began the quarter at  -$45.7 billion, so the expected widening to -$53.5 billion indicates the trade sector, despite the advent of tariffs,  will once again subtract from third quarter GDP.


5.  August Factory Orders — Thursday

The monthly Factory Orders Report isn’t a first-tier release by any stretch but given the trade tariff talk and anecdotal reports of slowing activity in some goods sectors stemming from  tariff uncertainty this report has taken on additional significance. For August, orders are expected to be up 2.1% but that comes after a decrease of -0.8% in July.  Orders ex the volatile transportation sector are expected to be up 0.2% matching the July increase.




Technicals Investment Yield Ranges Over Last Year


US Treasuries

FHLB Agency Bullets

Mortgage Backed SecuritiesMunicipals

US Corporate - Financials

US Agency Swap Rates

 Source: Bloomberg





Tom Fitzgerald Signature

Thomas R. Fitzgerald

Director, Strategy & Research



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