Today, we channel our inner Marvin Gaye to tell us “What’s Going On” with the U.S. Economy
How Good/Bad is Our Economy?
That’s a difficult question when the government is open and supplying us with lots of data, but in this shutdown environment it becomes herculean. We will try hard to answer that question using the best private-sector data we could find. Let’s start with employment.
According to ADP, private payrolls rose by 42,000 in October, beating the Dow Jones estimate of 22,000. According to ADP, this was the first time since July that private employers added jobs. All the hiring was in firms with 250 or more employees, and trade, transportation, and utilities led all industries in job growth by adding 47,000 jobs last month. Year-over-year pay growth was flat compared to the previous month, at 4.5% for job-stayers and 6.7% for job-changers.
So far, things are looking good in the labor market with decent hiring and wage gains. Keep in mind that ADP’s data doesn’t include government workers, and thousands of federal government workers came off the payrolls last month due to the end of their severance pay or the government shutdown.
Next, let’s look at layoffs. Seems like every day I read another article about how AI is allowing companies to eliminate tens of thousands of jobs. Just yesterday, the outplacement firm Challenger, Gray & Christmas announced that 153,074 jobs were eliminated last month. This was the highest number of cuts in the month of October in over 20 years. Pretty scary. To make things more depressing, Indeed announced on Tuesday that job openings in October fell to their lowest level since February 2021.
Based on all that information, I’d probably give the labor market a C+. But economic growth is based on consumer spending—which comprises 70% of GDP—so how’s that doing? Luckily, we have some data from our friends at the Institute for Supply Management. Each month, they give us a lowdown on the services and manufacturing sectors of our economy.
The manufacturing data has not been good lately, as that sector contracted for an eighth straight month in October. That said, manufacturing accounts for just 10% of our GDP, so we only really need to focus on the services sector. That news was great last month, as the ISM’s services index rose to an eight-month high and beat all estimates.
To sum up, while the labor market remains a concern, it looks like economic growth in the fourth quarter will be decent. Unfortunately, without the government’s reports on jobs, inflation, and consumer spending it’s hard to be certain about anything these days.
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