Supply tracks demand. Push follows pull. Flow seeks fulfillment — unless demand is silenced, unless push is obstructed, unless flow is drained by extreme upstream drought.
According to the Wall Street Journal, “U.S. hiring surged last month, the latest sign of accelerating economic momentum… Employers added 336,000 jobs in September, the strongest gain since January and up sharply from the prior month’s upwardly revised 227,000 gain… Job growth was also stronger in July than previously estimated.” (See blue line on the chart below.)
The Bureau of Labor Statistics also reports, “In September, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents, or 0.2 percent, to $33.88. Over the past 12 months, average hourly earnings have increased by 4.2 percent. In September, average hourly earnings of private-sector production and nonsupervisory employees rose by 6 cents, or 0.2 percent, to $29.06.”
Given these employment outcomes we should not be surprised if September Personal Consumption Expenditures (PCE) show continued strength (see red line below for PCE through August).
Many are very surprised by the September employment numbers. Bloomberg Economics was expecting closer to 173,000 new jobs. I sympathize with this gap. In recent weeks I have blogged less than usual. When I am missing in action here that usually means intense action in non-digital spaces. But this time my quiescence is much more the consequence of stubborn paradox. I am always uncertain. But the last few weeks my best assessments have been self-contradictory. Evidence available to me on the direction, speed, and rate of change related to the resilience of future flows has been especially inconsistent, even antagonistic.
I remain confident in the power of demand. I see where demand has been. I’m especially uncertain where demand is going and how quickly demand will shift — whichever way it goes.