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For the past few months, there have been concerns the U.S. labor market was beginning to slow down. By all standards, the labor market was still quite strong. But a caution that the monthly pace of job gains was gradually subsiding began to resonate across the financial markets. However, the Department of Labor’s October employment report triggered a collective sigh of relief on Wall Street.

In October, the economy added 128,000 new non-farm jobs, above the 90,000 the markets were expecting. The August and September monthly gains were also revised higher by a combined 95,000 jobs to 219,000 and 180,000, respectively. The national unemployment rate was reported at 3.6%, just above the 50-year low of 3.5% set in September. Annual wage growth remained at 3%, near a 10-year high. October was the 15th consecutive month of 3% or greater wage growth. Year-to-date, the economy is averaging a very healthy 167,000 new jobs per month.

The renewed assurance in America’s labor market has been a key driver in the recent surge in stock prices. On Thursday, the Dow Jones Industrial Average (DJIA) and S&P 500 all closed at new all-time highs. The tech-heavy NASDAQ matched its all-time high set on Tuesday. For the year, the DJIA has gained 18.6%, the S&P 500 23.1% and the NASDAQ 27.1%.

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The Department of Commerce recently released its latest Gross Domestic Product (GDP) report, which gave us our first glimpse of economic growth in the July-September third quarter. GDP is the total dollar-value of goods and services produced by a nation and is the primary measure of its economic health. In the third quarter, the economy grew at an annualized pace of 1.9%, slightly below the second-quarter rate of 2%. The past two quarters marked a sizable shift from the robust pace of growth from 2017 through the first quarter of 2019, when economic growth was as high as 3.1%.

But 68% of our nation’s economic growth is driven by consumer spending, which continues to charge ahead despite a very weak global economy and America’s trade disputes. So far, Americans continue to convert their job security and rising disposable income to sales at our nation’s check-out lines. A stronger labor market fuels that consumption even further.

The renewed optimism in the strength of the U.S. labor market has improved the short-term outlook for the economy. Admittedly, no one is expecting a sudden return to the high-octane growth rates of 2017-2018. The economy has currently returned to a more modest pace of economic growth, similar to the 2008-2016 average annual growth rate of just under 2%. October’s labor report does, however, indicate the current pullback in economic growth might be more short-lived than previously thought. And with that, the arguments of an impending recession have quickly been laid to rest.

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Mark Grywacheski spent more than 14 years as a professional trader in Chicago, where he served on various committees for multiple global financial exchanges and as an industry Arbitrator for more than a decade. He is an expert in financial markets and economic analysis and is an investment advisor with Quad-Cities Investment Group, Davenport.

Disclaimer: Opinions expressed herein are subject to change without notice. Any prices or quotations contained herein are indicative only and do not constitute an offer to buy or sell any securities at any given price. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets or developments mentioned. Quad-Cities Investment Group LLC is a registered investment advisor with the U.S. Securities Exchange Commission.

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