USA and China trade war. US of America and chinese flags crashed containers on sky at sunset ... [+]
At a time when so much attention is on impeachment and possible scandal, the White House could certainly use some positive economic news to divert the nation’s attention. So far, however, that continues to be elusive.
Today’s news that 136,000 jobs were created in September fell short of forecasts of 145,000. While not disastrous, it offers little encouragement in light of recent developments.
As I have reported over the last two months, negative signals have been accumulating. Both the UK and German economies registered negative GDP growth, we were recently witness to a yield-curve inversion (suggesting that market participants are anticipating a downturn), final revisions to Real Gross Private Domestic Investment–a key determinant of GDP–confirmed that it has fallen, traders continue to worry about fallout from the trade war, last month’s employment figures were disappointing, and “the ISM’s U.S. manufacturing index showed its first contraction in over three years. It came down to 49.1%; anything below 50% suggests contraction.”
This week’s announcements have offered more reasons to be pessimistic.
While the market expected the ISM manufacturing index to recover from last month’s disappointment, Tuesday’s report showed that it actually fell to a ten-year low of 47.8%. Observers are blaming this on the ongoing trade war–more unwelcome attention for the White House. “New orders, backlog, raw materials, inventories, exports and imports also contracted across the board last month, ISM data showed.” The trade war, not the Fed, is exerting a powerful drag on the economy. And on Thursday, the first indications of slowdown in the much larger services sector emerged.
The only semi-bright spot has been that the ADP employment numbers were above expectation. However, the fact that the forecast was already a pessimistic one means that this was of little solace.
