We have one more CPI report, one PCE report, and one NFP report (that is, Employment Situation for October, which will be released on November 1!) until the November 5 election.
The NFP report for September was hot, but it is only one month. The next month (October) may be more difficult to interpret, as the report may be distorted due to strikes and the hurricanes.
Key takeaways from the September NFP:
(1) The 3-month average change in jobs jumped from 116k (August) to 140k (August, after revision) and 186k in September! See Figure 1. So a 70k M/M jump for 3-month average! Big deal.
(2) the annual change in wages jumped from 3.63% (July) to 3.97% (September), but this does not look convincing against the other similar data series – see Figure 2. The labor market from the perspective of the employee (i.e. Quits Rate) is certainly not hot! – see Figure 3.
(3) the unemployment rate fell to 4.1%. A rising unemployment rate has historically preceded recessions. Are we approaching a recession.. we can look at how much the unemployment rate has increased from the lowest level in the last 12 months (Figure 4), or from the bottom of the cycle (Figure 5). Figure 6 shows the change in the unemployment rate from the bottom for the 2023-2024 cycle. An increase from the bottom of 0.9 pp is a big deal, but also a drop of 0.2 pp could be the deal. If next month we drop by next 0.1 pp to 4.0 – that could potentially mean an end to upward unemployment move.
So history (of the unemployment rate) suggests that we should be in a recession, but consumers are not reducing their spending, and businesses are still creating new jobs, and the unemployment rate has started to decline (although it's only been two months of decline, so we are not more certain that the trend has reversed).
As for the upcoming CPI report (published on Thursday, October 10), the market expects headline CPI to rise +0.1% M/M in September (prev. +0.2%), and the core rate is seen cooling to +0.2% M/M (prev. +0.3%). Cleveland FED Nowcast expects headline CPI +0.11% M/M, and core CPI +0.27%.
The PCE report will not be out until October 31. In the meantime, Retail Sales will be announced on October 17.
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