September Data Seems to Show Economy Rebounding

Originally published October 4, 2024

Chief Economist Eugenio J. Alemán discusses current economic conditions.

The recent fears regarding the state of the U.S. employment sector seemed to have disappeared completely this morning as markets are ‘recalibrating’ their view on the U.S. economy going forward. Not only are markets now agreeing with the Federal Reserve (Fed) on the number of rate cuts expected before the end of this year but the yield on the 10-year Treasury increased once again, signaling markets are starting to believe that the economy is not weakening as they had thought.

Chief Economist Eugenio J. Alemán discusses current economic conditions. The recent fears regarding the state of the U.S. employment sector seemed to have disappeared completely this morning as markets are ‘recalibrating’ their view on the U.S. economy going forward. Not only are markets now agreeing with the Federal Reserve (Fed) on the number of rate cuts expected before the end of this year but the yield on the 10-year Treasury increased once again, signaling markets are starting to believe that the economy is not weakening as they had thought.

However, we want to remind readers that markets typically overreact to new data and that there is the potential for this data to be revised in the future, so moderation seems to be in order when analyzing one data point. This is especially true today, considering that the Boeing strike would start to show up in the employment report for October, which is expected to be released on the first day of November.

The ISM Services PMI also showed some acceleration in the U.S. service economy, which is the largest sector of the economy, in September. However, that Index showed services sector employment contracting in September, which seems to be inconsistent with the nonfarm payrolls reported today. This should also be a sign that while today’s employment number was very strong, there is the potential for that number to be revised lower in the coming months and even later next year when the benchmark revisions are made. We need to remember that the benchmark revisions for the period April of 2023 to March of 2024 showed that employment growth was revised down by 68,000 per month, with markets also overreacting to that information several months ago.