Economic data mixed to start week, key employment data due out Friday

Monday's economic data was mixed as market participants await Friday's key Unemployment report from the commerce department. Personal Income and Spending both rose in August. Personal Income rose 0.3% and Personal Spending surged in August rising 0.5% Personal Consumption Expenditure(PCE) came in at up 1.5% versus a consensus of 1.4%. Core PCE, ex food and energy, was also 1.5%. PCE is the Fed's preferred measure of inflation and today's numbers confirm that inflation pressures remain manageable. Home sales data was on the weak side. August Monthly Pending Home Sales came in at -1.0%. On an annual basis, home sales fell 4.1% from August 2013. The drop in sales was pervasive. Every area of the country, excluding the West Coast, experienced declines. Today's data is not good news for Leading Economic Indicators(LEI), due at the end of the month, as pending homes sales are considered an important barometer of future economic activity. On Tuesday, the market gets a further look at the housing market. The S&P/Case-Shiller 20 city July Home Price Index is released. The index is expected to show a decline of -0.10% for July but still up 7.45% over the last twelve months. The first of several manufacturing and service sector surveys were released today. The Dallas Fed manufacturing Survey came in at 10.8%, up from 7.1 in July. On Tuesday the Chicago Purchasing Managers September reading is expected to come in at 62 confirming the continued expansion of the manufacturing sector. This will be followed on Wednesday by the Institute of Supply Management's(ISM) national manufacturing index which is forecasted to read 58.5. On Friday ISM release its service sector composite index. The consensus is for a reading of 57.1 Jobs data will become the focus of the market as the week moves on. On Wednesday ADP releases its September Employment Change. Expectations call for an increase of 202,000 jobs. Weekly Initial Jobless claims on Thursday are expected to rise to 300,000, The most important release of the week will be on Friday when the commerce department publishes its reading on the August jobs market. Non-farm payrolls are expected to rise substantially to 213,000 from July's tepid 142,000 reading. The unemployment rate is forecasted to remain at 6.1%. Average hourly earnings will rise 0.2% and hours worked remain at 34.5 according to the most recent survey of economists. Market participants will be looking closely at the overall labor participation rate. Fed chair Janet Yellen has highlighted this an important forecasting tool for the strength of the labor market. Last month's reading of 62.8 was near a historical low. This low reading indicates that the unemployment rate is falling because discouraged job seekers have dropped out of the labor pool; that is, they have stopped looking for work. The Fed is unlikely to raise rates with the labor market filled with so many unemployed and discouraged former participants. A reading above 64 would indicate the jobs market has absorbed this slack in the labor market and the economy is on more solid footing.