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Weekly economic review & outlook Robust job growth leads to Fed taper

November 08, 2021

You Need to Know

Week in review

The ISM services index reached an all-time high for October

Service sector demand is picking up, a positive trend for a return to normalcy.

Payrolls grew by a very solid 531,000 last month

Broad-based job gains for October show that people are finding employment even as payrolls remain well off pre-Covid levels.

Week Ahead

Forecasts

Small business optimism likely to fall

A high percentage of small businesses reported either cost of labor, inflation, or quality of labor as their most important problem in September, and it seems unlikely that these problems were significantly alleviated in October We project a fall in the small business optimism index to 98.5, the lowest reading since March..

Producer prices continue to face upward pressure

We project growth in the producer price index (PPI) of 0.6 percent, and growth in the core rate (excluding the volatile food and energy components) at 0.4 percent.

…and so do consumer prices

We project the overall consumer price index (CPI) rose by 0.5 percent for October, and by 0.3 percent for the core rate. This would bring the 12-month trend rates to 5.8 percent (the highest in 31 years) and 4.3 percent for total and core inflation, respectively.

As expected, the Fed announced that it will taper asset purchases starting this month and finishing in June. The taper announcement was followed later in the week by an employment report that continued to show progress in getting people back to work, particularly in the service sector where the most recent ISM survey showed robust growth, portending a solid fourth quarter for economic activity. Hear our recent podcast to learn more.

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