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Economic Commentary

Economic Commentary

Business sector recovery taking shape

Stronger survey readings in recent months suggest that the business sector has rebounded sharply from the COVID shutdown. The ISM services PMI rose to a 19-month high in September, the fourth consecutive month of solid expansion readings. The business activity and new orders components rose to the second highest levels ever, trailing only June’s reopening surge. All but one of the 17 industries within the survey reported growth for September. Even the employment component, which had lagged, climbed into expansion territory as service sector rehiring continues. 

Economic Commentary

Slower, but still solid, job growth

Nonfarm payrolls posted their weakest gain since the start of the post-lockdown surge. Still, with 661,000 jobs added for September, the labor market continues to rapidly heal as more businesses rehire workers and slowly build up staffing. The service sector led the way once again with outsized growth within the restaurant, retail, and health care sectors. There was a substantial drop in government employment, coming from both fewer teachers than usual in the COVID-19 world and a decline in temporary Census workers, resulting in a stronger 877,000 monthly increase for the private sector. The U-3 unemployment rate fell sharply again for September, down to 7.9 percent from 8.4 percent in August. 

Economic Commentary

The housing market is hot

The housing market extended its strong post-COVID surge into August. Demand continues to increase for owner-occupied housing, pushed up by record-low mortgage rates, a rebound in the job market, faster household formations, and an increased desire for “space.” Existing home sales rose by 2.4 percent to an annualized pace of 6.00 million units for August, while new sales climbed by 4.8 percent over an upwardly revised July figure to 1.01 million units (annualized). The August sales pace for both was the fastest since 2006. 

Economic Commentary

A surge in growth for the third quarter, but slower growth ahead continues

The post-COVID recession recovery continued at a strong pace in August with further sharp improvement for the labor market and solid expansion from the business sector. The rapid rebound in spending and hiring should drive a record 25-30 percent annualized surge in real GDP during the third quarter. After slower expected growth in the fourth quarter, the expansion should move forward at an above-trend pace in 2021 as vaccines become widely available. Key risks to the outlook include the timing of vaccine availability and the November elections. 

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