US market update

The government shutdown has deprived markets of critical information on the state of the US economy, and we now have to rely on less conclusive privately generated data, notably the PMI numbers.

Last week’s most important data release was the ADP measure of private sector job creation for September, which was bleak and suggested modest job destruction.

That said, this measure has often diverged with the more influential NFP number, and while it was not totally ignored by market participants, its impact on the dollar was relatively contained.

The absence of Friday’s payrolls data means that the bad taste left from the dismal ADP print will linger, and the longer the impasse continues, the more challenging it will be to get a clear read on the state of the US economy.

The Atlanta Fed real time forecast for third quarter growth points to strong expansion of nearly 4% annualised, in spite of the undeniable slowdown in job creation, suggesting that the latter is due to shrinking labour supply rather than any collapse in demand for workers.