• AIM Team

NAM: Monday Economic Report

The labor market has also been encouraging so far this year, with signs that the job market continues to tighten. Along those lines, manufacturing hiring remained robust in August. The sector hired 352,000 workers in August, edging down from 353,000 in July. The pace of hiring in both months was the best since November 2007. At the same time, total separations, including layoffs, quits and retirements, fell from 320,000 to 304,000, a six-month low. As a result, net hiring (or hires minus separations) jumped from 33,000 in July to 48,000 in August. Meanwhile, manufacturing job openings pulled back again from June’s 16-and-a-half-year high but largely trending higher over the past 12 months. Similar trends occurred in the larger economy, with job openings for nonfarm payroll businesses in August just shy of the survey’s all-time high recorded in July.

Most of the other headlines last week centered on prices and monetary policy. Notable pickups occurred in both consumer and producer prices in September, largely from higher energy costs. The consumer price index increased 2.2 percent year-over-year in September, up from 1.9 percent in August and a five-month high. Similarly, producer prices for final demand goods and services have increased 2.5 percent since September 2016, up from 2.4 percent year-over-year last month and returning to the pace in April. A fair share of this increase was related to recent hurricanes and likely transitory in nature. Core consumer prices, which exclude food and energy costs, inched up 0.1 percent in September, or 1.7 percent year-over-year. Core producer price inflation was somewhat higher at 2.1 percent year-over-year. Yet, both measures suggest mostly modest inflation right now, even with the recent acceleration.

Nonetheless, the Federal Open Market Committee is still likely to raise short-term interest rates at its December 12–13 meeting, mostly on improvements in the macroeconomy and from general tightening in labor markets. The minutes from its September 19–20 meeting appear to confirm this. While the decision whether or not to hike rates for the third time this year will still hinge on incoming data, “many participants thought that another increase in the target [federal funds rate] range later this year was likely to be warranted if the medium-term outlook remained broadly unchanged.”

Turning to the week ahead, manufacturers saw the beginning of the impact of the recent hurricanes in the August manufacturing production data, which declined 0.3 percent for the month. While that trend will likely continue in the September figures due out this week, industry leaders remain mostly upbeat in their outlook as output in the sector has risen 1.5 percent year-over-year. The latest surveys from the New York and Philadelphia Federal Reserve Banks will highlight manufacturers’ current thinking in those districts. Other highlights this week include new data on housing starts and permits, leading indicators and state employment.

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