Two Key US Economic Reports Expected To Post Upbeat Results

Inflation and the labor market are crucial economic factors for the electorate in presidential elections and there’s just one round of updates on these fronts before November 5. October results for payrolls and consumer inflation are scheduled for October 4 and 10, respectively. Although other issues will also influence election results, the average voter – if history’s a guide – will likely focus on changes in hiring and inflation for economic context. With that in mind, here’s an update of forecasts from TMC Research’s proprietary models. (For details on the models’ designs, see the note below.)

Let’s begin with the core measure of the Consumer Price Index (CPI). The logic of excluding energy and food prices is that this streamlined gauge of inflation tends to provide a clearer view of the trend vs. its more volatile headline counterpart that receives most of the attention in the media. After a mild uptick in core CPI to 3.3% through August, the upcoming September report is projected to show a resumption of disinflation that trims the year-over-year change to 3.1% (based on the point forecast). If correct, the consumer inflation trend will likely resume a disinflation bias that’s prevailed in recent history – a history that persuaded the Federal Reserve last week to cut interest rates. The August trend in core CPI ticked up for the first time since March, but TMC’s modeling for September suggests this may prove to be noise as the disinflationary trend returns.

For hiring by US companies, the recent slide in the one-year growth rate is projected to firm up in September, based on TMC’s estimates. The Labor Department’s report on non-farm private sector payrolls is expected to indicate a 1.5% rise vs. the year-ago level, according to the median estimate. If the forecast is accurate, the pace of hiring is set to pick up for the first time since March.

As with all forecasting models, the range of expected outcomes varies. In each of the charts, a 95% prediction interval is shown – a reminder that the potential for surprising results (relative to the median estimate) are non-trivial.

Using the median estimates a guide, TMC’s modeling is anticipating that the upcoming September numbers for consumer inflation and payrolls won’t materially differ from the previously published September data.

Note: the forecasts discussed above are based on ensemble methodologies that use eight models, each with its own unique set of pros and cons. The baseline forecasts are derived from taking the median estimate generated by the eight models. For details, please email James Picerno at: jpicerno@themilwaukeecompany.com