Lat­est re­ports give Fed the op­tion to do noth­ing

Daily Local News (West Chester, PA) - - MARKETPLACE - Joel Naroff Colum­nist

IN­DI­CA­TOR:Durable Goods>> Septem­berOrders, Pend­ing Home Sales and Weekly Job­less Claims KEY DATA:

>> Durables: -0.1 per­cent; Less Air­craft: +0.5 per­cent/ Pend­ing Sales: +1.5 per­cent/ Claims: -3,000

IN A NUT­SHELL: >> “The eco­nomic data don’t re­quire the Fed to do any­thing at next week’s meet­ing.”

WHAT IT MEANS: >> If the Fed mem­bers are be­ing driven by the data, they re­ally don’t have to worry that the num­bers are push­ing them to do any­thing. Durable goods or­ders were largely flat in Septem­ber as sharp de­clines in de­mand for com­put­ers, com­mu­ni­ca­tions equip­ment and es­pe­cially de­fense air­craft were mostly off­set by a rise in de­mand for civil­ian air­craft, ma­chin­ery, mo­tor ve­hi­cles and elec­tri­cal equip­ment and ap­pli­ances. Ba­si­cally, some sec­tor did well while other didn’t, which has been the story of this re­cov­ery. There was one dis­turb­ing as­pect of the re­port: Pri­vate sec­tor cap­i­tal spend­ing broke its win­ning streak as busi­nesses cut back on their in­vest­ment ac­tiv­i­ties.

Mean­while, there were more signs that the hous­ing mar­ket is im­prov­ing. Pend­ing home sales rose solidly in Septem­ber led by a jump in de­mand in the West and a solid rise in the South. How­ever, con­tract sign­ings were down in the North­east and Midwest. Both new and ex­ist­ing home sales have been trend­ing up­ward and this re­port in­di­cates that pat­tern should con­tinue.

New claims for un­em­ploy­ment in­sur­ance eased last week. Given the size of the econ­omy and the dy­namic na­ture of the la­bor mar­ket, we are ba­si­cally at the bot­tom. We could have num­bers be­low the cur­rent lev­els but it is hard to see that they would stay that way for very long.

There were two other num­bers re­leased to­day that point to a bet­ter econ­omy. The Rich­mond Fed’s man­u­fac­tur­ing in­dex posted its sec­ond con­sec­u­tive rise in ac­tiv­ity. This part of the coun­try had been hurt­ing and its turn­around is good to see. Also, the home­own­er­ship rate rose in the third quar­ter. The rate has been trend­ing down­ward since 2004 and maybe Mil­len­ni­als, who are en­ter­ing their thir­ties, are fi­nally start­ing to buy houses.

MAR­KETS AND FED POL­ICY IM­PLI­CA­TIONS: >>

Janet Yellen and her band of fear­less mon­e­tary pol­i­cy­mak­ers skate into next week’s FOMC meet­ing with lit­tle worry about hav­ing to raise rates. With a rate hike hav­ing be­come a po­lit­i­cal is­sue, if the Fed fid­dled while the econ­omy burned, there would be a prob­lem. But this econ­omy sim­ply con­tin­ues to grow at a trend rate mean­ing the Fed has the op­tion to do what it wants – which is likely noth­ing. As for in­vestors, while it is still all about earn­ings, the elec­tion is a cloud hang­ing over ev­ery­thing. In two weeks, we should be done with this hor­ror, but un­til then, don’t ex­pect any great move­ment. Joel L. Naroff is pres­i­dent and chief econ­o­mist of Naroff Eco­nomic Ad­vi­sors. He can be reached at 215-497-9050 or joel@narof­fe­co­nomics. com. On the Web: www. narof­fe­co­nomics.com.

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