Fed officials and jobs report will deliver key messages

The Labor Department will issue its September employment report on Friday, but keepers of the nation’s numbers will have important things to tell economy watchers ahead of the bellwether employment data.
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The Labor Department will issue its September employment report on Friday, but keepers of the nation’s numbers will have important things to tell economy watchers ahead of the bellwether employment data.

Economists are forecasting that the U.S. economy added 190,000 jobs in September and that the jobless rate will remain at 5.1 percent, but pessimistically they are also looking for a seven-point drop in consumer confidence, as expressed by The Conference Board’s index, to 94.5 from 101.5. The board will release its monthly report this morning.

Economists also think motor vehicle sales in September will be slightly lower, at 17.4 million, than the 17.7 million pace of August, which was a strong month for the auto industry. That report will be out on Thursday.

On Monday, reports on personal income and consumer spending for August offered a somewhat mixed view. The Commerce Department said personal income rose 0.4 percent from July, a month when spending also increased by the same percentage, but consumer spending slowed to an 0.3 percent gain from a gain of 0.5 percent in July.

Taken together, the Wall Street Journal said, the reports suggest that consumers will continue to boost economic growth despite the stock markets’ recent roller-coaster ride, which continued Monday as all three of the nation’s major stock indexes closed lower.

As is often reported, consumer spending accounts for more than two-thirds of the nation’s gross domestic product.

"The world financial markets were in retreat and scary China economic growth stories filled the media skies in search of an audience, but the consumer did not go into hibernation; they headed to the mall to shop till they dropped in August," Chris Rupkey, chief financial economist at Union Bank in New York, told the Los Angeles Times.

If the economy continues its growth momentum, the Federal Reserve is expected to raise interest rates at one of its two remaining 2015 meetings in October and mid-December.

William Dudley, president of the New York Federal Reserve, said Monday that the economy is “doing pretty well” and he thinks the central bank will raise rates this year, although he said ongoing economic data will have to support it.

His voice is not the only one from the Fed that will be heard this week. On Wednesday, chairman Janet Yellen will speak at a Fed conference in St. Louis. Vice chairman Stanley Fischer will speak on monetary policy at a Fed conference in Boston on Friday.

"I think the hawks will be important, but to get a nod from Dudley and Fischer that they're ready [to hike rates], too, that's the signal you need," John Canally, investment strategist and economist at LPL Financial, told CNBC. "They're the center of gravity, along with Yellen."

Unemployment is the lowest in seven years, but inflation is below the central bank’s 2 percent target. Uncertainty in the global economy attributable to a slowing growth engine in China is something the Fed continues to watch.

“Markets would love to have clarity about how the world is going to evolve. But we are not going to have that clarity,” Dudley said.

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