A Resilient Economy With Earnings Still in the Driver’s Seat

The U.S. economy remains resilient despite weaker hiring and persistent inflation, leaving corporate earnings as the main support for equities.

• Employers added only 29,000 jobs in September, while revisions removed 60,000 jobs from July and August; the three-month average is about 51,000 per month.
• Net migration was around zero or negative in 2025 and is expected to remain very low or negative in 2026, reducing labor-force growth and making historical payroll benchmarks less reliable.
• Second-quarter GDP growth was revised to 2.2% annualized from 1.5%, real final sales to private domestic purchasers rose 4.6%, and real consumer spending increased 0.6% in August.
• The September ISM manufacturing index stood at 54.5, its ninth consecutive month above 50, while August PCE inflation was 3.4% and core PCE inflation was 3.0%, both above the Federal Reserve’s 2% target.
• The 10-year Treasury yield reached about 5.28% and the 2-year yield 4.84% on October 2, each up roughly 50 basis points in a month; analysts expected third-quarter earnings growth of 29.5%, following 86% of S&P 500 companies beating estimates in the second quarter.

Takeaway: The authors remain constructive on U.S. equities because GDP, spending, manufacturing and earnings do not confirm a recession, but they stress valuation, diversification and company-specific execution because inflation, weak real income and high borrowing costs remain risks.