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Everyone knew to expect an unusually weak job report for September, due to the hurricanes. We were not disappointed. U.S. employers experienced a net decline of 33,000 jobs in September, much worse than the anticipated increase of just 80,000 jobs and the first negative number since 2010. The leisure and hospitality sector, which includes restaurants, experienced the largest decline, down 111,000 jobs. Among the few sectors posting an increase in jobs was healthcare services, up by 13,000. Even that gain was far below the standard, which has been running more than double that pace in recent months. The silver lining in the monthly report, and the focus of the market, was the unemployment rate and wages. The unemployment rate fell to its lowest level in more than 16 years, 4.2 percent. The Bureau of Labor Statistics reported the hurricanes had "no discernible effect" on the highly analyzed unemployment rate. Wages rose 0.5 percent for the month, bringing the year-over-year gain to 2.9 percent. Some analysts were quick to suggest the increase in wages came from a change in the composition of jobs – fewer lower-paying hourly jobs, such as restaurant workers, skewed the overall calculation. Regardless, the lower employment rate and higher earnings gauge are better signals to consider than negative job growth.

Other Key Indicators this Week:

Auto Sales – The auto industry recorded in September its best month of sales since 2005.  Light-vehicle sales totaled18.5 million on a seasonally adjusted, annualized rate (SAAR) basis, an increase of over 15 percent from August sales. The jump in sales came from an earlier-than-expected surge in activity, as people began to replace vehicles damaged from Hurricanes Harvey and Irma. September was the first in six months that sales broke out of the 16 million SAAR range. Demand for pick-up trucks, SUVs and crossovers continues to lead auto sales.

Trade Deficit – The strengthening global economy is beginning to show itself in the U.S. trade data. The trade deficit shrank by 2.7 percent in August to the smallest level in 11 months, -$42.4 billion. The decline was a result of imports and exports both moving the right direction: imports declined 0.1 percent, and exports increased 0.4 percent. Some analysts believe the deficit would have been smaller if not for the disruptions in the petroleum industry created by Hurricane Harvey. Petroleum exports plummeted 11.5 percent, as petroleum refining, production and distribution at key Houston ports was shuttered. The level of exports was the highest since December 2014, led by consumer goods, cars and telecom equipment.

Strategically for Credit Unions

What do you get when you fill a room with economists and a microphone? Lots of charts, tables, quirky stories and multiple opinions about the fate of the economy and interest rates. The saving grace is that the consensus of economists at the recent Economic Forum is moderately higher rates over the near term, better productivity as millennials continue to mature and take their place in the working world, and a generally improving economy. As for interest rates, after today’s job report, the market is predicting an 80 percent chance the Federal Reserve will raise rates in December.

Sarina Freedland – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.