Economic Outlook for September 2024

Purchasing Managers Index (PMI):
The PMI for September 2024 came in at 47.2, slightly above August’s 46.8 but still well below the 50 threshold, indicating ongoing contraction in the manufacturing sector. While the pace of decline has moderated, subdued new orders and production suggest persistent challenges. The manufacturing sector remains constrained by weak demand despite gradual improvements in supply chains.

Unemployment Rate:
The unemployment rate decreased slightly to 4.2% in September, down from 4.3% in August. However, this improvement is tempered by a significant drop in job openings, with the JOLTS data showing a decline to 7.67 million from 7.91 million. This reflects a cooling labor market where job creation is slowing, though certain sectors continue to show resilience.

Non-Farm Payroll:
September saw an addition of 142,000 jobs, a modest improvement over the previous month’s 114,000 but still below market expectations of 164,000. Wage growth showed some recovery, with average hourly earnings increasing by 0.4%, compared to 0.2% in August. This suggests a slight boost to worker purchasing power, although broader labor market weaknesses persist.

Market Outlook:
The financial markets reacted cautiously to the September data. With the Federal Reserve cutting the Federal Funds Rate to 5.00% during the month, markets signaled growing concerns over the economic slowdown. While inflation data showed continued moderation—headline CPI year-over-year fell to 2.5% from 2.9%—the persistent challenges in labor and manufacturing raise recession fears.

Conclusion:
September’s economic data highlights a mixed outlook. While the labor market showed modest improvements and inflation continues to ease, the manufacturing sector remains in contraction, and job creation is subdued. The Federal Reserve’s rate cut underscores concerns about the slowing economy, with the possibility of a recession becoming more pronounced as we approach the end of the year.