By Daniel Gould

Note: This post is an excerpt from Gould Asset Management’s Economic and Market Review for the Third Quarter of 2015.  The excerpt is posted here for the benefit of our blog subscribers.

The US recovery held steady this past quarter, even in the face of market volatility, concerns over China, and mixed economic indicators. But signs of a potential softening are emerging.

The US entered the quarter posting substantial growth, with GDP expansion for Q2 now estimated at a solid 3.9%. Gains in consumer spending are key to the current momentum. In an encouraging report, July sales of durable goods like appliances and automobiles lifted 2%. These indicators are critical, since personal consumption accounts for about 70% of national GDP.

Elsewhere, the outlook is less clear. Domestic manufacturing has suffered, as the strong dollar makes US exports more costly to overseas buyers. Unemployment, a vital benchmark, remains at a seven-year low of 5.1%. Yet the labor force participation rate, the share of working-age individuals either employed or actively seeking jobs, is unimpressive. Last month participation dropped yet again to 62.4%, a low point not seen since the 1970s. Hiring in September was weaker than expected, with the US adding 142,000 jobs instead of the projected 200,000. Job creation for August and July was revised downward as well. We will be watching carefully to see if job numbers make a rebound, or if they indicate the transition to a phase of slower growth.

The turbulence in US and global financial markets has also clouded the picture, with analysts debating the significance of recent swings in US indexes. Though we believe the US can weather some slowing abroad, recent signs of deceleration suggest that overseas distress may have begun to weigh on domestic performance.

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