**mute all participants**

Can’t stop spending 

Consumer spending increased again in the month of August but at a slower pace than the last three months. Americans dug into their savings to make this happen, because incomes fell by 2.7% in August, which is the biggest drop in incomes since the early days of the pandemic. Spending mainly increased at hotels and restaurants as Americans’ propensity to travel seems to be picking back up again and restaurants across the country are reopening for indoor dining in limited capacities.

Moral of the story: Monthly consumer spending, at this point, is only about 4% lower than pre-COVID levels. It’s likely that consumer spending will continue to decelerate unless there’s additional support from the federal government (the House has at least passed the next stimulus bill, though it’s unlikely it passes through the Senate in its current form). Regardless, the consumer has proven to be more resilient than I would’ve expected. 

Second wave scaries 

The September jobs report was published this week and it was unfortunately weaker than expected. The U.S. added 661k new jobs in the month (well below expectations of 800k), which is the slowest rate of hiring since the economy reopened and indicates a deceleration in the recovery. While the private sector looked ok, the jobs number was negatively impacted by schools and state colleges that have adopted some form of online learning, impacting bus drivers, cafeteria workers, etc. Unemployment fell for the fifth straight month to 7.9%, but this is mostly impacted by a decrease in the labor force participation rate (700k people left the labor force, so aren’t counted in the official unemployment rate anymore).If accounting appropriately for those furloughed, the unemployment rate actually came in at 8.3% for September.

Moral of the story: So far, we’ve recovered about 11.4m of the 23m jobs lost during the pandemic. However, the decline in the labor force participation rate indicates there aren’t jobs available for those people, which isn’t a good thing. Additionally, there have already been some big layoffs announced that haven’t even made it to the official employment yet – Disney, Shell, and Dow recently announced over 50k layoffs and American and United announced 32k furloughs. If another federal relief package doesn’t get passed in the near future, the labor market recovery could reverse in a big way. 


A few big political things worth discussing from this week. First, the dumpster fire that was the first 2020 (un)presidential debate, which informed us in zero ways about policy and caused far too much brain damage. Second, the announcement of Trump contracting COVID-19 in the middle of the presidential election, which obviously raises a few questions. If Trump has to withdraw from the race prior to polling day because of his health, the Republican National Committee would vote to choose a new presidential candidate – they could, but are under no obligation to, choose VP Pence. Even though millions of ballots have already been mailed out and returned by voters, the electoral college system might allow for any replacement selected by the Republicans to stand in Trump’s place. Congress also has the power to delay the presidential election until January 20th, but that’s never happened in this country’s history. 

Moral of the story: I’m running out of fingers to count the number of risks the stock market is trying to grapple with at this point. Coronavirus cases have started to increase again, the economic recovery seems to be losing steam, and I have no idea what the federal government will look like after the election. One thing I know for sure is that stock markets do not like uncertainty, so let the choppy waters continue. 

Sign up for the weekly digest