Personal Incomes, Manufacturing Remain Strong

Popular Economics Weekly

Personal income rose a solid but slightly lower-than-expected 0.3 percent in September, reports the Commerce Department’s Bureau of Economic Analysis (BEA). The wages & salaries component rose 0.3 percent, another sign of rising incomes. That’s why consumer spending was especially solid in September. So-called Personal Consumption Expenditures, a proxy for retail sales, rose an as-expected 0.5 percent and reflecting the month’s strength in vehicle sales.


Graph: Econoday

U.S. Manufacturing is also strong, according to the ISM’s Manufacturing Index. “The October PMI® registered 51.9 percent, an increase of 0.4 percentage point from the September reading of 51.5 percent, “ said Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee.

The New Orders Index registered 52.1 percent, a decrease of 3 percentage points from the September reading of 55.1 percent. The Production Index registered 54.6 percent, 1.8 percentage points higher than the September reading of 52.8 percent. The Employment Index registered 52.9 percent, an increase of 3.2 percentage points from the September reading of 49.7 percent.


Graph: Econoday

In other words, manufacturing employment, production and deliveries were up, though new orders dropped slightly. This tells us, along with the strong auto sales that Friday’s unemployment report should also be solid. The consensus among economists is 175,000 payroll jobs will be added. Today’s ADP private payroll survey estimated a slightly lower total of 147,000, vs. its September 202,000 revised total.

But if the Labor Department’s Friday’s payroll numbers are lower than predicted, it may keep the Fed from raising rates in December, as was just hinted in its policy statement released at the end of today’s FOMC meeting.

“The committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of further progress toward its objectives.”

Bond and mortgage rates have been rising as a consequence of the expectation that the Fed will eventually raise their rates. The Fed said inflation has been moving up toward its 2 percent target since the beginning of the year.

But is the economy strong enough to warrant a rate increase? GDP growth in the third quarter was 2.9 percent, highest in 2 years. Shouldn’t we wait at least several more quarters to see if this growth rate will continue?

Harlan Green © 2016

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About populareconomicsblog

Harlan Green is editor/publisher of, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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