Economic data is finally flowing again after the federal government’s temporary shutdown halted key releases. Early indicators show an economy that is still growing—but clearly slowing, with increasing signs of labor softening, persistent inflation pressures, and a widening split between manufacturing weakness and service-sector resilience.
This summary highlights the most relevant developments shaping freight demand, transportation spending, and 2026 planning.
Labor Market: Growth Continues, but Momentum Is Fading
The September payroll report finally arrived—and the signal is mixed.
Key Data Points
- +119,000 jobs added, beating expectations of 53,000
- Unemployment: 4.44%, inching toward 4.5%
- Labor participation: Up to 62.4% (still below April’s 62.6% peak)
- Household employment: +251,000
- Unemployed workers: +219,000
- Average hourly earnings: +0.2% in September; +3.8% YoY
What it means:
Despite a better-than-expected headline number, revisions erased 33,000 jobs, and rising unemployment suggests continuing weakening. Wage growth is outpacing the CPI, which may support holiday spending, but labor softness will pressure household incomes if layoffs continue.
Fed implications:
With the next FOMC meeting approaching in under two weeks, the balance of evidence still points toward a possible 0.25% rate cut in December, though the vote will likely be contentious.
Manufacturing: Contraction Deepens and Tariffs Add Pressure
The industrial economy continues to retrench.
Manufacturing Indicators (October)
- ISM Manufacturing: 48.7 (8th straight month of contraction)
- New Orders: 49.4 (still contracting)
- Production: 48.2
- Prices: 58 (down, but still elevated)
Industry sentiment is deteriorating.
- Order books are weakening across most industrial sectors.
- New and expanded tariffs are eroding margins.
- China’s retaliatory restrictions—rare earths, semiconductors, freight access—add fresh stress to supply chains.
- The commercial vehicle sector remains depressed, with fleets delaying purchases amid demand uncertainty.
Bottom line:
Manufacturing faces no near-term relief, especially as tariff pressures feed into consumer prices and global supply chain friction intensifies.
Services Sector: The Economy’s Primary Stabilizer
In contrast to manufacturing, services continue to provide the economic “lift” keeping GDP positive.
Services Indicators (October)
- ISM Services: 52.4
- Business Activity: 54.3
- New Orders: 56.2
- Prices: 70 (highest since Oct 2022)
- Employment: 48.1 (5th month of contraction)
Interpretation:
The strength in new orders and activity suggests continued demand for service-based industries. However, employment contraction shows growing uncertainty—firms may be hesitant to expand payrolls until economic direction becomes clearer.
Consumers: Spending Still Resilient, but Tariff Effects Are Imminent
Income growth near 5% should support short-term spending, including the holiday season. But the runway is narrowing:
- Tariff-driven price increases are about to hit consumers directly.
- Most manufacturers’ inventory cushions are gone, forcing price pass-throughs.
- Consumers may soon face a choice: pay more or buy less—a traditional recession signal.
Once demand contracts, job losses follow, triggering a cycle that will be hard to reverse in 2026 without policy support.
👀What to Watch This Week
With the government back online, a packed slate of delayed releases is coming:
- Retail Sales (September): Expected +0.3% after +0.6% in August
- PPI (September): Last reading showed +2.65% YoY for headline, +2.8% for core
- Durable Goods (August, delayed): Forecast +0.35% after July’s jump driven by aircraft orders
These releases will shape the Fed’s final outlook heading into December.
Strategic Takeaways for Transportation & Supply Chain Leaders
- Freight demand will be increasingly uneven as services prop up the economy but manufacturing stalls.
- Tariffs will insert new volatility into both cost structures and consumer demand.
- Labor market softening may temper freight volumes entering 2026.
- CV and rail equipment orders are likely to remain cautious until demand signals stabilize.
- Scenario planning for 2026 is essential, especially around:
- Tariff timing and scope
- Manufacturing contraction scenarios
- Consumer-spending inflection points
- Fed rate-cut velocity
Understanding these drivers is critical for budgeting, procurement, and capacity planning into 2026.