Unemployment Rate Falls to Impressive 7.9%: Bleak Winter Economy Expected

The unemployment rate fell to 7.9% in September from 8.4% in August. Although some in the mainstream media are taking issue with the weaker than expected jobs added– economists had anticipated more than 800k but just 661k were added.

Friday morning, Dow futures were down 335 points, a decline of 1.2%, while NASDAQ Composite and S&P 500 futures declined 238 and 44 points, losses of 2% and 1.3%, respectively.

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I would remind investors that this is typical. For whatever reason, economists can never get that non-farm payroll number right. As such, I’d caution investors not to read too much into that number as it will likely be revised anyway. The overall trajectory signals improvement, the question now: how long will it last?

Challenging Winter Ahead

Although many businesses have been permitted to resume activity over the summer, questions mount as to how long they can and will stay open. As colder weather sets in, many shops, bars, and restaurants that have seen a rebirth in business throughout the summer thanks to sidewalk shops and cafes, they could face a challenging winter. It’s possible that with heat lamps they may squeeze a few more months from their outdoor traffic but by December, the Northern parts of the country will face significant challenges.

The Effect of the President’s Positive Covid-19 Test on Consumer Confidence and Sentiment

Consumer confidence and sentiment are two critical components that affect the economy. They provide a window into the psychology of the consumer. Given that the President and his wife just tested positive for the virus, the news will likely have an impact on Americans’ confidence. We should anticipate that people will take the virus more seriously now, they will likely restrain themselves from going out more often, and they will pull pack on spending. Consumer spending makes up 2/3rds of the U.S. economy so, if we see a pull-back in spending, it will translate immediately into a slowdown in the economy.

Without a vaccine available until possibly Spring, it could turn into a very long and economically bleak winter.

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