United States-110516155

1Michael Feroli (1-212) 834-5523michael.e.feroli@jpmorgan.comJPMorgan Chase Bank NAMichael S Hanson (1-212) 622-8603michael.s.hanson@jpmchase.comJPMorgan Chase Bank NAMurat Tasci (1-212) 622-0288murat.tasci@jpmchase.comJ.P. Morgan Securities LLCAbiel Reinhart (1-212) 270 4058abiel.reinhart@jpmchase.comJPMorgan Chase Bank NANorth America Economic Research27 September 2024J P M O R G A NSurveys relating to the manufacturing sector remained down-beat this week, and August factory shipments of core (nonde-fense, ex-aircraft) capital goods continue to exhibit sluggish growth. Even so, we believe capital equipment spending growth this quarter should be peppy, supported by another pop in the volatile aircraft category. The other major interest-sensitive component of GDP—housing—has yet to clearly benefit from the roughly 100bp decline in mortgage rates over the past three months. Pending home sales in August muddled along at low levels while house price appreciation has slowed in recent months, although weekly mortgage pur-chase applications have been edging up. New home sales fell but remain at decent levels. We continue to see growth slowing into the last quarter of the year, largely due to slowing labor market activity and cooling labor income growth. This week delivered mixed news on jobs. As has been the case for several weeks now, initial claims for unemployment insurance are sending a sanguine message about the job market, falling under 220k in the latest week, which is little changed from a year earlier. However, the consumer confidence report’s labor market differential, or the difference between those who say jobs are plentiful less those who say they are hard to get, slumped to the lowest since early 2021 (Figure 2). This measure is inversely corre-lated with the unemployment rate, pointing to a risk of a fur-ther rise in labor market slack. A simple regression using their levels indicates that the latest decline in the differential implies a 15bp rise in the unemployment rate (though we look for a smaller increase next week)-100-75-50-250255024681012808590950005101520%, saFigure 2: Unemployment rate and CB labor market differential Net %, sa; inverted scaleSource: BLS, Conference Board, J.P. MorganLabor market differential (Share of jobs plentifulless hard-to-get)UnemploymentrateThe news on inflation this week continued to be well-be-haved. The Fed’s preferred inflation gauge, the core PCE index, increased only 0.13% in August. The year-ago gain was little-changed at 2.68%, and over the last three months this measure has increased at a benign 2.1% annual rate (Fig-ure 3). The news in this report was largely previewed by the already-released CPI and PPI reports, and Fed speakers had already intimated that the tame expected reading was the last hurdle toward making the larger move. •Core inflation and real consumer spending posted only modest gains in August•Even so, real GDP is on track to post another solid gain in 3Q•Housing has yet to res