Reinhart Week in Review by Madison Investments 11.01.2024

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EMPLOYMENT

The economy added just 12,000 jobs in October. The unemployment rate was unchanged at 4.1%. Average hourly earnings rose 0.4% for the month and are up 4.0% year-over-year. The labor force participation rate fell one-tenth to 62.6%. 

Our Take: Hurricanes and strikes distorted the October employment report to the point that it is difficult to glean any economic insight. The report is unlikely to change any opinions at the Fed prior to their meeting next week.

 

INFLATION

The Personal Consumption Expenditures Price Index (PCE) rose 0.2% in October and has risen 2.1% over the past twelve months. Core PCE (excluding food and energy) rose 0.3% and 2.7% respectively over the same periods. 

Our Take: The PCE report was as expected. Inflation continues to move, albeit slowly, toward the Fed’s 2% target.

 

GDP

Real GDP grew at a 2.8% annualized pace in the third quarter.

Our Take: The U.S. economy continues to exhibit strong growth. Consumption (+3.7%), business investment (+3.3%) and government spending (+5.0%) led the way. Strong growth coupled with moderating inflation should be the recipe for a Fed rate cut next week.

 

MUNICIPALS

Chicago Mayor Brandon Johnson presented his budget proposal to the City Council this week. Mayor Johnson’s $17.3 billion budget includes a $300 million property tax increase which will help close the budget gap and would avoid cuts to services. It is estimated that homeowners would incur a 4.8% increase in the city portion of their property tax bill.  If passed, the property tax increase would be the first increase since 2022.  

Our Take: During his campaign, Mayor Johnson promised to not raise property taxes. However, a looming budget gap led Mayor Johnson to make a difficult choice. Without the tax increase, cuts to essential services including police, firefighters, and city workers would have occurred. The property tax increase alone will not close the entire budget gap.   Mayor Johnson’s administration has already introduced a hiring freeze along with debt refinancing. Some City Council members stated that they would not support a property tax increase. The city’s budget deadline is December 31.
 

About Reinhart Fixed Income
“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC (“MAM”), and Madison Investment Advisors, LLC (“MIA”). MAM and MIA are registered as investment advisers with the U.S. Securities and Exchange Commission. Madison Funds are distributed by MFD Distributor, LLC. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority. The home office for each firm listed above is 550 Science Drive, Madison, WI 53711. Madison’s toll-free number is 800-767-0300.

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