Weak data released this week indicates that the manufacturing and construction sectors are deteriorating faster than expected, and Friday’s anemic employment report points to an economic slowdown that’s spreading beyond the factory sector.
Recession Watch: September saw the economy add 136,000 new jobs, but most economists were expecting an increase of 150,000. While the new jobs tally is still considered good, the problem is that the report is often viewed as a lagging indicator. Most growth occurred in the services sector, and retailers shed 11,000 jobs, according to the most recent report. The report also indicated that after three months of strong wage growth, wages slipped slightly in September as the average hourly earnings edged down 0.04 percent.
Sarah House, senior economist at Wells Fargo Securities, said the slowdown in hiring inserts “some fragility into the outlook for consumer spending as labor income looks at the greater risk of slowing at the same time consumer confidence has wobbled.”
UBS economist Samuel D. Coffin added, “We have been expecting the economy to slow to near-recession in response to the tariffs and their particular effects on manufacturing, energy and retail sectors, which were already faltering. This week’s data suggests that the weakening in activity is coming sooner and may be greater than we have been expecting.”
Coffin revised fourth quarter GDP to 1.6 percent, down from the previous expectation of 1.8 percent. He also expects that the U.S. tariffs applied in May, June and September will continue to bog down U.S. economic activity.
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The UBS economist now expects the Fed Reserve to cut rates again at the end of October at its FOMC meeting. And he said the policy rate will likely head down to 1 percent in 2020.
Tariffs: With the European Union tariffs that were implemented by the U.S. this week following a WTO arbitrator’s calculation, here’s a list of key dates for upcoming tariffs.
Oct. 15: An increase from 25 percent to 30 percent on $250 billion in Chinese imports from List 3. Initially slated for Oct. 1, President Trump delayed its implementation by two weeks as a goodwill gesture as the two countries prepare for their next round of trade talks.
Oct. 18: The arbitration decision is connected to tariffs on $25 billion in European goods sanctioned by the WTO from an Airbus subsidy case.
Nov. 13: Trump said in May that he was delaying for six months a decision on a 25 percent tariff on European autos and auto parts. Mid-November is about when he needs to make his decision.
Dec. 15: The date for next batch of tariffs–15 percent on $155 billion in Chinese imports–from the balance of List 4 goods from China. And don’t forget, China is also imposing a retaliatory tariff of between 5 percent to 10 percent on the remaining product list totaling $75 billion in U.S. exports.
Barneys: Friday is the expected deadline date–although it could happen before then–for finalizing an agreement with fashion trade show organizer Sam Ben-Avraham to acquire the bankrupt retailer as a going concern.