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11/09/2016
Market Update

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A respectable 161,000 jobs were created in October; the unemployment rate fell by 0.1% to 4.9%; and previous estimates for the number of positions created in August and September were revised higher by a combined 44,000 jobs. Perhaps most notably, average hourly wages grew by 2.8% year over year — the highest annual jump since July 2008.
This Week
  • A respectable 161,000 jobs were created in October; the unemployment rate fell by 0.1% to 4.9%; and previous estimates for the number of positions created in August and September were revised higher by a combined 44,000 jobs. Perhaps most notably, average hourly wages grew by 2.8% year over year — the highest annual jump since July 2008.
  • The Federal Reserve held interest rates steady in November (as expected) but acknowledged continued strengthening economic data and progress on its goals of full employment and 2% inflation; many investors and analysts anticipate a mid-December rate hike, especially following October’s strong jobs report.
  • According to Markit’s October manufacturing Purchasing Managers’ Index (PMI), new orders, backlogs and hiring all accelerated during the month, with most components reaching their best levels in a year. A report from the Institute for Supply Management showed a pickup in growth; but, combined, both reports indicate good conditions in the manufacturing sector overall to begin the fourth quarter.
  • Construction spending fell by 0.4% in September, bringing the year-over-year decline to 0.2% from 0.3%. Despite the slowdown, residential spending jumped by 0.5% in the month, with 0.9% growth in the year over year, led by multi-family construction. A decrease in non-residential construction (public and commercial) held the report back for the month.
  • Mortgage purchase applications dropped by 0.4% in the week ending October 28, although year-over-year applications rose by 9%. Refinancing also fell 2% for the same week as interest rates jumped to their highest levels since June.
  • Worker productivity climbed by 3.1% during the third quarter, the best rate in two years, driven by a sharp acceleration in output. The second-quarter reading was revised upward by 0.4%.
  • Initial jobless claims rose by 7,000 for the week ending October 29, while continuing claims fell by 14,000 for the week ending October 22. Both figures remain near historic lows, demonstrating the continued strength of the job market.
  • The British pound gained on news of a U.K. High Court ruling that formal Brexit negotiations cannot begin without parliamentary approval; the currency jumped even higher after the Bank of England announced a decision to hold its bank rate steady and kept its target bond purchases unchanged.
  • The Bank of Japan maintained its monetary policy this week on the belief that its current policy settings should be sufficient to raise inflation near its 2% target.
  • Manufacturing enjoyed a globally strong October. China’s manufacturing PMI moved to its highest level since July 2014, thanks to strong output; new orders grew at the fastest pace in more than two years, driven solely by domestic demand. Job losses in China fell to their lowest level since May 2015. The eurozone also saw improvement as new orders, production and employment accelerated. In the U.K., manufacturing moderated slightly but was still solid.

 

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