September Jobs and ISM Reports will Vie with Trade and Impeachment Headlines

Sep 30, 2019
Factory Floor Workers

September Jobs & ISM Reports Headline Week’s Releases

The first week of the month always brings a boatload of first-tier releases to asses the prior month’s performance, and this week is no exception. From the jobs report on Friday to ISM surveys tomorrow and Thursday we should get a good idea read on September activity, but the question is can the results rise above the din in D.C. created by the impeachment and trade issues? As for the data itself, the trio of reports mentioned should reflect an economy that continues to grow but with a little less momentum than was the case earlier in the year, but nothing that flashes recession. Finally, if the Fed speak wasn’t enough for you last week you’ll get another dozen this week updating their views on the economy and monetary policy with Chairman Powell speaking on Friday afternoon.


Treasuries
Treasury Curve Today Week Change
3 Month 1.78% -0.12%
6 Month 1.84% -0.06%
1 Year 1.75% -0.06%
2 Year 1.64% -0.03%
3 Year 1.58% -0.02%
5 Year 1.57% UNCH
10 Year 1.69% UNCH
30 Year 2.14% UNCH
Short-Term Rates
Fed Funds 2.00%
Prime Rate 5.00%
3 Mo LIBOR 2.10%
6 Mo LIBOR 2.06%
12 Mo LIBOR 2.04%
Swap Rates
3 Year 1.569%
5 Year 1.522%
10 Year 1.584%
Economic Calendar
Date Statistic For Briefing Forecast Market Expects Prior
Oct 1 ISM Manufacturing Sep 50.3 50.0 49.1
Oct 1 Construction Spending (MoM) Aug 0.4% 0.5% 0.1%
Oct 2 ADP Employment Change Sep 140k 140k 195k
Oct 3 Factory Orders Aug -0.5% -0.2% 1.4%
Oct 3 ISM Non-Manufacturing Sep 55.0 55.1 56.4
Oct 4 Change in Nonfarm Payrolls Sep 140k 147k 130k
Oct 4 Unemployment Rate Sep 3.7% 3.7% 3.7%
Oct 4 Avg. Hourly Earnings (YoY) Sep 3.2% 3.2% 3.2%
Oct 4 Trade Balance Aug -$54.6b -$54.5b -$54.0b

calendar icon Top 5 Events for the Week

Sep. 30 - Aug. 4, 2019

1. Fed Speak & Impeachment Developments – All Week
2. September Employment Report – Friday       
3. September ISM Manufacturing – Tuesday
4. September ISM Non-Manufacturing – Thursday
5. August Trade Balance – Friday

 

1.  Fed Speak and Impeachment Developments – All Week

A gaggle of Fed speakers will once again grace the market this week with their latest takes on the economy and state of monetary policy (i.e., to cut or not to cut). Perhaps the key takeaway from the speakers last week was voter Charles Evans, who had been a dove at one time and since has moved to a neutral stance, reiterated his middle-of-the-road stance by opining that holding pat seems the best course of action. That would seem to work against thoughts of a rate cut in October but we still see high odds of a cut in December. A total of twelve Fed officials will be speaking with the spotlight on Chairman Powell’s Friday afternoon appearance at a D.C. Fed Listens Event.  The other matter that will take oxygen and provide potential headlines will be impeachment news and notes. The early indications are the market is pushing those concerns to the background but as the process moves along it will be harder to ignore. Oh, and it also means any thoughts of fiscal stimulus legislation is dead, if anybody was hoping for something besides monetary policy to goose growth.

 

2.  September Employment Report – Friday

The personal spending numbers for August were bit of a disappointment indicating the consumer may be slowing purchases but the September jobs report on Friday will give us a wider view on the domestic economy. The headline number is expected to print a 147k gain in jobs versus 130k in August. The days of 200k gains seem behind us but gains in the mid-100’s should keep the unemployment rate steady and it is expected to stay at 3.7% for a fourth straight month. Meanwhile, wage gains are expected to ease off the 0.4% print in August to 0.3%, which is still respectable. YoY wage gains are expected to stay at 3.2% for a second straight month but still off the 3.4% cycle high set back in February. In summary, if the report comes as expected it will show a labor market that continues to moderate to a lower level of job creation but still enough activity to cover new entrants to the labor force while monthly and YoY wage gains should remain well-within recent trends.

 

Monthly Change in Jobs 

 

3.  September ISM Manufacturing Index – Tuesday

Along with this week’s jobs report the ISM Manufacturing Index will give us another early tell on September activity with the report due tomorrow morning. The forecast is for a slight uptick to 50.0 versus 49.1 in August. The 50-level represents the dividing line between an expanding and contracting sector, so the expectation is to straddle the line for now. Despite the slight uptick expected in September, the index will still pale in comparison to its 12-month average of 54.4 which speaks to the damage done by trade uncertainties and the global slowdown.

 

4.  September ISM Non-Manufacturing – Thursday

The ISM Non-Manufacturing Index on Thursday follows the ISM Manufacturing that has been flirting with the dividing line between a contracting and expanding sector. The services sector, however, constitutes nearly 90% of the economy and it’s not expected to be close to contraction territory. That index is expected to show continued strength with a 55.1 print forecast versus 56.4 in August. The index has averaged 57.4 over the past year so an expected modest decrease from the yearly average but still well above the 50 dividing line indicating more health in the services sector versus manufacturing.

 

5.  August Trade Balance – Friday

For August, the trade balance (which accounts for goods and services) is expected to widen ever-so-slightly to -$54.5 billion versus -$54.0 billion in July. The trade deficit has ranged from a  twelve-month wide of -$60.8 billion in December as companies tried to front-run new tariffs, to a narrow -$50.0 billion in February as the front-running ran its course. The deficit was -$53.3 billion a year ago, so despite all the trade-related headlines and tariffs, the deficit is expected to remain wider today versus where it was a year ago. That speaks to dollar strength and economic disparities between trading partners being stronger factors in trade than tariffs.

 


bar graph icon  Yield/Duration Matrix

 

Yield/Duration Relationship 

CenterState Disclosure

 


 

Tom Fitzgerald Signature 

Thomas R. Fitzgerald

Director, Strategy & Research

Tfitzgerald@centerstatebank.com

 

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