Market and economic update: U.S. economic growth continues, but the pace slows

U.S. employment remains the strong positive story for the U.S. economy. For September, the unemployment rate fell to 5.9%, the lowest level in six years, helped by a decline in the labor force. The strong positive was seen in nonfarm payrolls rising 248,000, plus strong revisions (up 69,000) to the prior months.

Nonfarm payroll growth has averaged more than 200,000 for the past 12 months. The normalization in the jobs market seems to continue to elude wages. Average hourly earnings were unchanged in September, indicating little tightness in the labor market. The strength in the jobs market is consistent with stronger U.S. production, although leading indicators of production seem to be slowing. The September purchasing manager surveys indicate the surge in manufacturing and services activity is ebbing.

The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) fell 2.4 points to 56.6, while the Non-Manufacturing PMI fell one point to 58.6. Both surveys remain consistent with strong growth, but the acceleration phase of growth seems to be ending. This key data for the United States remains consistent with our expectation for 3% growth over the next couple of quarters.



The non-U.S. global economy seems to be slowing, despite the recent recovery in U.S. growth. Global purchasing manager surveys generally fell, although most indications are for slowing growth rather than recession. Purchasing manager surveys for the eurozone, Japan, China, India, Brazil, and Russia deteriorated. Activity in the eurozone, Japan, China, and India continued to expand but at slower rates, while Brazil and Russia continued to contract.

Growth has generally been harmed by rising global tensions, such as the Russia-Ukraine conflict. Changing the trend in global growth will likely require some kind of stimulus. The European Central Bank (ECB) may soon engage in some form of quantitative easing, although it will be modest, and slowing inflation may allow for stimulus in India and China. For now we would expect slower global growth over the next couple of quarters, with the world generally avoiding another recession.

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