INDICATOR: September Consumer Prices, Real Earnings and Small Business Optimism

KEY DATA: CPI: +0.2%; Over-Year: +1.4%; Excluding Food and Energy: +0.1%; Over-Year: +1.7%/ Real Earnings: -0.2%; Over-Year: +3%/ NFIB Optimism: +3.8 points

IN A NUTSHELL: “Inflation may not be soaring but it is eating into household wages nonetheless.”

WHAT IT MEANS: The Fed is intent on getting inflation back up, no matter how long it takes or how many assets it needs to buy, and it seems it is doing that quite nicely.

Consumer prices rose moderately in September, but the data had some major ups and downs. For example, energy prices cratered but used vehicle costs soared. Non-food and energy commodity costs jumped sharply but services were flat.

Food at home was flat while eating out cost a lot more. Medical expenses went pretty much nowhere. In other words, there was no consistency in the changes. The future course of prices is just as uncertain as we cannot be sure how strong growth will be over the next six months.

Hourly wages were pretty much stable in September, but when you subtract inflation, real wages were down moderately. But the wage component didn’t tell the whole story of incomes. Hours worked rose solidly and that created a strong increase in weekly earnings.

The small business sector is coming back, but it still has some way to go. The National Federation of Independent Business reported that its Optimism index rose in September to its highest level since February of this year. But while sales and earnings are coming back, they are still well below normal. Despite that, hiring plans are picking up, as openings remain high.

IMPLICATIONS: Three weeks and counting. And then the counting really begins. Given the huge number of mail-in ballots expected, it could be quite a while before the election results are known. Let’s hope not, but with my state’s legislature, Pennsylvania, making believe that you can count a potential million or more mail-in ballots in a few minutes, there could be chaos.

But the markets and the economy do not seem to think the election is that big a deal. Investors don’t appear to believe that it matters who is elected and they still find any excuse to drive up the markets.

Meanwhile, consumer and business optimism are rising and households are spending. Amazingly, not even all those ugly negative political ads have been able to change that pattern.

Thankfully, we have Netflix, Prime Video and a few other apps and we can watch commercial free programming that is calm and uplifting, or not so much. But at least we don’t have to listen to how we will all die a horrible death that takes forever and will happen in a location that is dark, lonely and terrifying, if we are crazy enough to vote for the other candidate. OK, you get the picture.

Conditions are really not that bad right now, so let's smile and get back to playing board games, baking bread and hanging out with our families like we did in the good old days, you know, at the peak of the pandemic (which just might be returning). Anybody know a good shrink?

Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm.