LIVE MARKETS-Is good news still bad? Jobless claims, layoffs, PMI, construction spending

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

IS GOOD NEWS STILL BAD? JOBLESS CLAIMS, LAYOFFS, PMI, CONSTRUCTION SPENDING

Thursday's data offerings—from the labor market, manufacturing and construction—all offered evidence of a solid jobs picture and economic resilience. Cumulatively, they offer a solid rationale for Warsh & Co to keep on hiking interest rates, for now.

This, despite the fact that the odds of an October rate hike are lower today than yesterday, per CME's FedWatch tool.

First, 197,000 US workers joined the queue outside the unemployment office last week USJOB=ECI, 1,000 fewer than the prior week, and 3,000 shy of analyst expectations.

Ironing out weekly volatility, the four-week moving average of initial claims is still drifting sideways, with a very slight downward bias.

For months, jobless claims data has suggested the labor market is stuck in low-hire/low-fire mode.

"Jobless claims continue to defy expectations and remain exceedingly low, dovetailing with the JOLTS reports’ layoff rate which shows that while businesses aren’t hiring at a rapid pace, they are reticent to let their current crop of workers go," says Matthew Martin, senior US economist at Oxford Economics.

On the subject of "fire mode," outplacement firm Challenger, Gray & Christmas (CGC) reports that US firms announced 43,281 layoffs in September USCHAL=ECI.

That's down 18% from the prior month and off 20% from a year ago, and marks the lowest September reading in four years.

There have been a total of 553,195 layoffs announced so far in 2026, down 39% from last year's January-to-September period, which was inflated by DOGE firings.

Market and economic conditions were the leading reason cited for layoff decisions. Closings, demand downturn, and restructuring were next in line, followed by AI.

Even so, AI is responsible for 120,136 pink slips so far this year—or 21% of the total—and remains the leading reason cited for mass layoffs in 2026.

"Companies are in a wait-and-see period right now," writes Andy Challenger, labor and workplace expert at CGC. "Employers are facing high energy costs, an uncertain war in Iran, a rate hike that could make hiring more expensive, plus the likelihood of surging healthcare costs."

"We’ve seen layoff activity subside over this year, and September continues to illustrate this point."

Ongoing jobless claims USJOBN=ECI, which are reported on a one-week lag, inched 0.6% lower to 1.701 million, the lowest reading in almost three years.

The metric has settled, at long last, to a level associated with the pre-pandemic "normal." So why the ongoing deterioration in jobs confidence, as reported by the Conference Board?

Turning to manufacturing, US factory activity continued to expand in September.

The Institute for Supply Management's (ISM) Purchasing Managers' Index (PMI) USPMI=ECI shed an insignificant 0.1 point last month to print at 54.5, or half a point south of consensus.

Still, the report marks the metric's ninth consecutive month north of the magic PMI level of 50, the dividing line between monthly contraction and expansion.

Wandering into the weeds, new orders and employment accelerated, while production weakened and inventories dipped into contraction territory. Export orders and imports lost steam.

The prices paid element—an inflation predictor—jumped 6.8 points to 77.9, the highest level since May.

"This PMI supports those at the Fed who believe that inflation risks are a bigger threat to the economy right now than recession risks," says Carl Weinberg, chief economist at High Frequency Economics. "The Fed will pay attention to the price signal in this index, and the FOMC will be reassured that it does not have to worry too much about an improving manufacturing sector when it contemplates rate hikes to fight inflation."

Once again, commentary from ISM's survey participants was dominated by geopolitical uncertainties, tariffs, supply challenges and cost pressures.

But according to S&P Global, factory activity gained less momentum last month than it originally claimed.

Its final take on September manufacturing PMI USMPMF=ECI printed at 55.9, or 1.1 points weaker than its initial "flash" reading of 57.0. Even so, it marks a two-point acceleration from August's final reading.

Production and new orders expanded, powered by strengthening demand, while the employment component hit a five-year high.

Short supply, tariffs and the Iran war, however, pushed input prices—an inflation predictor—ever higher.

"(PMI hit) its highest since May 2022 as a surge in new orders encouraged factories to lift output sharply higher," says Chris Williamson, chief business economist at S&P Global Market Intelligence. "The combination of accelerating growth, increased hiring and elevated price gauges will add to speculation of a further imminent rate hike from the FOMC."

The S&P Global and ISM indexes differ from each other in the weight they apply to the various components (new orders, employment, etc).

Here's how closely they agree (or not). The dueling PMIs are set to meet again on Monday, when they spar over the services side of the coin.

Finally, expenditures on construction projects USTCNS=ECI unexpectedly jumped by 0.9% in August, according to the Commerce Department.

Economists polled by Reuters expected no monthly change.

A peek beneath the hood reveals the private sector outlays carried the day, rising 1.1% compared with the measly 0.2% increase in government outlays. Compared with last year, however, private construction spending has slid by 3.1%, while government-funded construction spending increased 2.5%.

Office projects provided some lift, rising on monthly and annual bases by 4.6% and 29.8%, respectively.

Spending on housing—the erstwhile tentpole of construction spending—increased by 1.1%. Still, residential outlays have fallen 4.8% year-on-year.

With 30-year fixed mortgage rates having soared above 6% for more than four years now, and short supply driving home prices higher, evaporating affordability continues to weigh on the housing sector.

(Stephen Culp)

EARLIER ON LIVE MARKETS:

RETAIL TRADERS SIT OUT VOLATILE SEPTEMBER AS ACTIVITY FALLS TO LOWEST SINCE LATE 2024 CLICK HERE

WALL STREET EASES AS YIELDS PUSH TO FRESH MULTI-DECADE HIGHS CLICK HERE

DEFENSE ETF NEARS BEAR-MARKET TERRITORY CLICK HERE

AI AGENTS: A THREAT TO BANK DEPOSITS? CLICK HERE

EQUITIES ON BORROWED TIME CLICK HERE

Q4 OFF TO ROCKY START CLICK HERE

EUROPE BEFORE THE BELL: FUTURES IN THE RED, SEMIS SET FOR BOOST CLICK HERE

INFLATION RELIEF GIVES BONDS LITTLE REPRIEVE CLICK HERE