Key Highlights

  • The first estimate of third-quarter real GDP growth showed a deceleration to 2.8% from 3.0% in the second quarter.
  • Personal consumption accelerated to 3.7% growth from 2.8% in the previous quarter.
  • Initial October payroll estimates indicate only 12,000 jobs were created, significantly below the expected 100,000.
  • October new-vehicle sales are estimated to have finished just above the Cox Automotive forecast at 1.33 million and a seasonally adjusted sales pace of 16.0 million.

Economic Insights

The first estimate of third-quarter real GDP growth showed a deceleration to 2.8% from 3.0% in the second quarter.

  • Personal consumption accelerated to 3.7% growth from 2.8%.
  • Spending on goods accelerated to 6.0% growth from 3.0%.
  • Government spending accelerated again, contributing to the relatively strong GDP result.

Personal Income and Spending

As expected, personal income growth accelerated to 0.3% from 0.2% in August.

  • Employee compensation growth was steady and strong at 0.5%.
  • Government transfer payment growth accelerated to 0.4% from 0.3%.
  • Spending on goods increased 0.5% following a 0.2% decline in August.

Employment

Initial October payroll estimates indicate only 12,000 jobs were created, significantly below the expected 100,000.

  • Hurricane Milton negatively impacted the report.
  • The private sector shed 28,000 jobs, while the government added 40,000.
  • Manufacturing shed 46,000 jobs following a decline of 6,000 in September.
  • Auto dealers added 3,200 jobs, which left employment at dealers down 5,300 or 0.4% below the February 2020 level.

Inflation and Spending

The Personal Consumption Expenditure Index (PCE), the key gauge of inflation that the Fed follows, increased by 0.2% in September, as expected, after rising 0.1% in August.

  • According to the PCE, overall price inflation declined to 2.1% year over year, the lowest since February 2021.
  • The core inflation rate was steady at 2.7% when a small decline had been expected.
  • Factoring in inflation, real spending increased 0.5% in September, stronger than expected following a 0.2% gain in August.

Labor Market

The headline unemployment rate was steady at 4.1%.

  • Year-over-year earnings growth increased to 4.0% from a downwardly revised 3.9% in September.
  • The labor force participation rate declined to 62.6%.
  • The underemployment rate was steady at 7.7%, 0.7 percentage points above February 2020.
  • Monthly average hourly earnings growth accelerated to 0.4% from a downwardly revised 0.3% in September.