All three equity indices closed at record highs on Thursday, driven by market optimism regarding the high probability of a 25-basis point rate cut following the September 17 FOMC meeting. This positive momentum persisted despite a downward revision in nonfarm payroll data, which indicated that the economy was significantly weaker from March 2024 to March 2025 than previously estimated, with total job figures revised downward by 911,000. This means the average monthly job gains for that time frame were roughly cut in half from the previously reported level of 147,000 to about 70,000. It marked the single largest preliminary numerical revision since they started tracking the metric in 2000. The final revision will come in February 2026.
Piggybacking on the poor showing in nonfarm payrolls, initial jobless claims rose by 27,000 to 263,000 last week, the highest level since October 2021. The four-week moving average of jobless claims rose to 240,500, the highest level since June of this year.
This week’s PPI and CPI reports were also considered tame enough not to derail enthusiasm for monetary easing. PPI surprisingly fell 0.1% and July’s figure was revised downward to 0.7% from 0.9% MoM while rising just 2.6% YoY versus estimates for a 3.3% increase. CPI rose 0.4% MoM versus estimates for a 0.3% increase and 2.9% YoY, matching consensus estimates. Excluding the volatile food and energy sectors, CPI rose 0.3% MoM and 3.1% YoY, both matching estimates. Skyler Weinand of Regan Capital commented, “It’s clear that inflation is relatively calm, which gives the Fed the flexibility to focus more on stemming ongoing weakness in the labor market. We expect the Fed to cut by 25 basis points next week and follow through with another two 25 basis point cuts this year.”
In auto lending news, prominent Texas subprime lender Tricolor Holdings filed for bankruptcy this week and plan to liquidate its holdings. The non-bank lender used temporary credit lines to fund loans and then packaged them into asset-backed securities (ABS) to sell to investors. The ABS market has started to show cracks in recent months from higher delinquencies due to low employment, higher car prices and higher interest rates. According to Cox Automotive, auto repossessions surged last year to their highest levels since 2009. This year, the share of subprime borrowers at least 60 days late on their payments rose to its highest level in 30 years. More than anything, the company’s closure portends difficult times ahead for auto lenders and purchases of ABS.
KEY INDICATORS THIS WEEK
CPI - Still above FOMC’s target but not enough to deter them from addressing labor weakness.
Next week - FOMC meeting, retail sales and import/export prices.