October 2, 2026
Employers added 29,000 jobs in September, well short of the 90,000 economists expected, and revisions removed a combined -60,000 from the July and August totals. Healthcare, construction, and manufacturing reflected gains while jobs in the insurance industry fell sharply. The unemployment rate rose to 4.2%, back to its June level, though part of the increase reflected more people looking for work, with participation up to 61.8%. Wage growth also decelerated, with average hourly earnings up just 0.1% for the month and 3.0% year-over-year. The report prompted traders to scale back bets on a Federal Reserve rate increase on October 28 to only about 20%.
Core personal consumption expenditures (PCE), the Fed’s preferred price gauge, rose 0.2% in August and 3.0% from a year earlier, above the Fed’s 2% target, while the headline measure rose 0.3% and 3.4%. Prices for goods and services both saw increases. Despite higher prices and decelerating personal income, which slowed to 0.2% in August, personal spending was strong, jumping 0.9% for the month. The savings rate slowed to 4.1% as consumers saved less to offset higher spending. Consumer confidence fell to 81.9 in September, its lowest level since 2014, as consumers grew more pessimistic about current conditions and future expectations. Higher costs were a key concern cited by survey participants, particularly for energy prices. Crude oil prices eased this week as more supply flowed from the Middle East through the Strait of Hormuz and via pipelines. In addition, the G7 announced plans to release as much as 100 million barrels of oil and diesel reserves over the next four months to relieve fuel prices. West Texas Intermediate (WTI) oil has dropped to $91/barrel and Brent crude has fallen to around $102/barrel.
Housing prices continued to appreciate in July, with the S&P Cotality Case Shiller 20-City Index increasing 2.5% despite rising borrowing costs. Chicago led the index with annual growth of 6.9%, while Seattle trailed the index with a drop in home prices of -1.6% over the past year. San Francisco (3.5%), San Diego (1.6%), and Los Angeles (1.2%) all had modest gains over the past year. The 30-year fixed rate mortgage averaged 7.3% as of October 1, according to Freddie Mac, as long-term US Treasury yields rose.
Long-term rates moved higher this week and the yield curve steepened on higher growth and inflation expectations, along with worries over US debt levels. As of this morning, the 2-year US Treasury is trading at 4.84%, the 5-year yield is at 5.06%, and the 10-year is up to 5.28%. The 10-year/2-year spread has widened to approximately 45 basis points versus 36 basis points at the end of last week.
The Chandler team expects at least one more quarter-point hike this year, in line with the Fed’s projections and current market expectations. Fed speakers this week indicated that a pause in October may be warranted to assess incoming data. The Chandler team continues to manage client portfolios with a disciplined approach, along with an emphasis on high credit quality and sufficient liquidity.
Next Week: S&P Global US Services Purchasing Managers Index (PMI), Institute for Supply Management (ISM) Services Index, Trade Balance, MBA Mortgage Applications, FOMC Meeting Minutes, University of Michigan Sentiment Index
Written by Genny Lynkiewicz, CFA, Senior Portfolio Manager