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The third estimate for 2Q19 real GDP growth came in at 2.0%, driven by consumption and government spending that were partially offset by inventories, net exports and housing. Looking ahead to the third quarter, inventory growth should decline further while consumer spending and government spending will likely grow at a more moderate pace, and trade numbers should continue to be weak. Weakness in economic activity is evident in the data out last week; the ISM manufacturing PMI dropped to 47.8, the lowest since 2009, and ISM services dropped to 52.6 from 56.4.
The unemployment rate fell to a fresh 50-year low of 3.5% in September, while the labor force participate rate remained steady at 63.2%. Nonfarm payrolls increased by 136,000 in September, below expectations of 150,000. This appears to be roughly in line with August, except September only added 1,000 temporary 2020 Census workers, while last month 25,000 Census workers were added, resulting in more permanent job gains in September. Wages disappointed, flat on the month and rising just 2.9% y/y for all workers. With fewer unemployed people, fewer discouraged workers and fewer people joining the labor force, the labor supply is constrained, which should be a headwind for long term growth.