The United States economy is full of innovation. It has to be. Manufacturing industries that dominated the economy decades ago - textiles, televisions, even automobiles to a large degree - have moved overseas, where labor and materials costs are lower. Yet the U.S. economy, even during the pandemic and the current period of high inflation, has expanded to record levels. If U.S. corporations weren't innovating, creating new products (such as vaccines and AI) and services (such as Zoom calls) and moving into new markets, the domestic economy would not be growing, and capital would not be flooding into the country. The current high level of the U.S. dollar relative to currencies around the world attests to the confidence that global investors have in the durable and innovative U.S. economy.

The Bureau of Labor Statistics (BLS) reported that the U.S. economy generated 254,000 new jobs in September, well above our forecast of 135,000 and the consensus of 140,000. August's result was revised higher by 17,000 to 159,000. July was revised up by 55,000 to 144,000. September's increase in payrolls and revisions higher to past results took the three-month average up to 186,000, just below the 12-month average of 203,000. With inflation descending towards 2%, the Fed felt comfortable reducing the federal funds rate by 50 basis points last month to support the economy and bolster the job market. But there is little evidence of weakness in this morning's report. The September unemployment rate declined to 4.1%, a tenth below our estimate and consensus. Average hourly earnings increased 13 cents month to month and are 4.0% higher year over year (compared to 3.9% in August). The average workweek ticked down to 34.2 hours. Job gains continued to trend higher in food services and drinking places, healthcare, government, social assistance, and construction. Employment showed little or no change in mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; retail trade; transportation and warehousing; information; financial activities; professional and business services; and other services. After the report, stock futures rose and the yield on the 10-year Treasury climbed. Futures contracts suggested a 90% probability that in November the Fed will reduce the funds target by 25 basis points and a 10% chance that it will cut the funds rate by 50 basis points, compared with probabilities of 72% and 28%, respectively, before the report. The probability that the funds target will be lower by 75 basis points or more from current levels after the December meeting was 26%, down from 54% before the release.

Lennar Corp. based in Miami, is one of the two largest builders of homes based on 73,087 closings, across approximately 23 states, in FY23. Rival D.R. Horton actually delivered 82,917. Lennar's $34.2 billion in revenue ranks close to Horton's $35.5 billion helped by an average sales price that is about $60,000 higher. The company's East region is its biggest, accounting for 31% of deliveries. Lennar builds step-up (68% of closings), entry level (28%) and retirement (4%) homes, with an average selling price of $446,000. The company also provides mortgage financing. Lennar's Multifamily business develops and manages apartment complexes through joint ventures. Homebuilding represented $32.7 billion of the company's $34.2 billion in FY23 revenue. It is also the biggest contributor to pretax earnings. The company's fiscal year ends on November 30.

The major indices are lower to flat at midday. Geopolitical tensions persist. Oil prices have kicked up another 4%. There's also much focus on tomorrow's September Jobs report. We see Nonfarm Payrolls edging lower to 135,000 new jobs versus 142,000 for August. We forecast the Unemployment Rate to come in unchanged at 4.2%.