Ah, the 5.0, it use to be the status symbol of cool; perhaps somethings never change…

With the unemployment rate falling to 5.0% this past Friday, the Federal Reserve Board (FRB) may finally see fit to start raising interest rates. This would imply that the US economy was cool! Bit of a stretch huh?

US Data

Domestic data proved fruitful to the market, bringing the Dow Jones into positive territory and moving the S&P 500 close to 2% on the year. While not substantial returns, this is great news given where we were a month ago.

  • ISM Manufacturing 50.1
  • Trade deficits narrowed to -40.81B
  • ISM Non-manufacturing PMI at 59.1
  • Initial jobless claims at 276,000
  • Non-farm productivity, 1.6% increase for Q3
  • Average Hourly Earnings, 0.4% for October
  • Non-farm payrolls 271,000
  • Participation rate stayed at 62.4%
  • Unemployment rate, 5.0%
  • The U6 Under-employment rate, 9.8%[1]

The data strongly supported overall sentiment that the FRB will raise rates in December. Further supporting the case was a statement from FRB Chair, Janet Yellen, that a rate increase in December was a “live possibility” …


Europe continues to face headwinds in their attempts strengthen their economic condition. The Volkswagens emissions scandal continues to strike fear in the German consumer. While it may seem like a small scandal (in scale) to the US, the thing to remember is that 1 in 7 workers in Germany work in the auto industry[2].

Recent elections in Portugal, re-elected an austerity friendly government with a 38% margin. Socialist and communist parties will be uniting to oust the current elected officials next week. Their intent would be to battle back against austerity measures imposed by the EU and potentially make an exit from the union.

On-going refugee asylum will wreak havoc on economic production in the short run, however German plans for integration can prove promising for long term economic growth.

Emerging Markets

China continues to battle weak economic conditions. Encouraging is the fact that the Shanghai Composite has gained 20% since late August, officially putting it in bull territory after its +40% fall from June to August.

Brazil unintentionally provided some relief to oil supplies as the state run Petrobras oil company had some production come off line. While great news for oil supplies, not great news for a country where production is essential. Current inflation sits at 9.92% annualized[3].


True the economic data for last week came in strong, but one week does not determine FRB actions to be taken 5 weeks from now… Truly additional data supporting last week’s data will need to come out confirming what we’ve seen. Initial indication, however, is that the slowdown feared late in the 3rd quarter has turned into a temporary event for our economy.


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[1] www.investing.com

[2] www.bloomberg.com

[3] www.investing.com