It was a bit refreshing to see data back at the forefront of headlines this past week. Weaker manufacturing, weaker service sector, and a mixed job report has helped push the 10yr back down below the 1.60% handle.
The ISM Manufacturing Index for September declined from 49.1 in August to 47.8, now hitting the lowest levels since back in June 2009. Any print below 50 suggests that the sector is in contraction. Overall, customer inventories have risen, but producer inventories have fallen, suggesting more softer production ahead. The report does note that, “global trade remains the most significant issue” and that “sentiment this month remains cautious regarding near-term growth.”
The index fell to 52.6 from 56.4, now the lowest level since August 2016. This weakness is a bit more troubling as the service sector is 90% of the economy, while manufacturing is only 10%. Although we remain above 50, it’s the lowest level in 3 years and could possibly suggest that current market recession fears are more realistic if in fact the slowness transitions into the consumer side of the coin.
Construction Spending in August rose by +.1%, below the expected +.5%. Within the headline number, residential construction rose by +.9%, with single-family up +1.4% and multi-family lower by -.9%. Non-residential spending fell by
-1%, primarily off a -2.8% decline in commercial construction. Finally, public spending rose by +.4% with state/local up +.6%, and federal down by -2.2%. Overall, construction spending on a whole is still lower by -1.9% YoY.
September Employment Report
Payrolls rose by +136k with 22k government and 114k private sector jobs added. The unemployment rate has dropped to 3.5%, a new low dating back to 1969. The earnings piece, however, was disappointing, with earnings posting a flat result from the previous month, dropping the YoY growth down from 3.2% to 2.9%. Payroll growth is slowing as evidenced by the weakest 3-month average since 2012.