Morning Report: ADP and BLS differ by a country mile 4/6/18

Vital Statistics:

Last Change
S&P futures 2642 -19
Eurostoxx index 374.5 -1.62
Oil (WTI) 63.07 -0.44
10 Year Government Bond Yield 2.80%
30 Year fixed rate mortgage 4.43%

Stocks are lower after Trump announced more tariffs against China. Bonds and MBS are flat.

Jobs report data dump:

  • Payrolls up 103,000 (below expectations)
  • Unemployment rate 4.1% (above expectations)
  • Labor Force Participation Rate 62.9% (increase of 0.1%)
  • Average Hourly Earnings up 0.3% / 2.7% (in line with expectations)

Another month where the ADP number (increase of 241k) and the BLS number (increase of 103k) were a mile apart. Weather may have played a part in the low payrolls number, as the Midwest and East Coast were hit by a number of snowstorms that knocked out power early in the month. Construction employment fell, which kind of supports that theory. Wage inflation remains in check for the most part. The employment-population ratio was flat at 60.4%. Overall, a disappointing report, but the weather makes me want to put an asterisk next to it.

The NFIB reports that almost a third of small businesses raised wages to attract and / or retain employees last month, which was the highest percent since 2000.

Forget about the old picture of the Rust Belt – decaying small towns that peaked in the 1950s and crashed during the 1970s. Things have changed. When you think of Detroit, you now think of Quicken Loans, and places like Elkhart Indiana are unable to keep $90,000 SUVs in stock because the town is booming with factory workers making $68,000 on average. At full production, workers are making $90k, and foremen are making 6 figures. The unemployment rate is basically zero – a town of 50,000 people has 9.500 unfilled job openings. Despite what some economists think about employers having market power and exhibiting monopsonist behavior (hard to believe dozens of employers in a single locality could collude), the laws of supply and demand do in fact apply to the labor market.

CFPB Acting Director Mick Mulvaney responded to Elizabeth Warren’s letter that posed about 100 questions about how the agency is being run. Suffice it to say, she believes the agency isn’t being aggressive enough. Mulvaney’s response was basically to say that he doesn’t have to respond, and doesn’t intend to. “When I served on the House Committee on Financial Services as a Member of Congress, I was frequently frustrated with what I perceived to be a lack of responsiveness, transparency and accountability at the Bureau,” Mulvaney wrote. “I encourage you to consider the possibility that the frustration you are experiencing now, and that which I had a few years back, are both inevitable consequences of the fact that [the Dodd-Frank Act] insulates the Bureau from virtually any accountability.” The saga continues..

Donald Trump announced plans for another $100 billion in tariffs against China last night, and China responded with plans to retaliate. As of now, this is still in the trash-talking phaseLarry Kudlow says negotiations haven’t even begun yet.

Treasury has issued a set of recommendations for modernizing the Community Reinvestment Act. Probably the biggest change would be to move the focus from where bricks and mortar branches are to where the banks actually lend. This would bring the law up to date with the concept of less branches and more online banking. The other recommendation is to bring in more standardization and more certainty into what the government is looking for in examinations. In other words, make the law less arbitrary.

30 Responses

  1. Good article on how the campus left is seeping into real life


  2. Alternate headline: California is Running Out of Migrants to Exploit.


  3. Copied Right from the Wall Street Journal

    The Vanishing ‘Caravan’

    You can relax about that invading horde of poor Central Americans.

    By The Editorial Board
    April 5, 2018 7:28 p.m. ET

    President Trump can’t seem to decide if his border-control plan is a success or an imminent national crisis.

    Not long ago he was touting fewer apprehensions at the Southwest border. Then he jumped on the story, from BuzzFeed and Fox News, that an immigrant “caravan” was heading from Central America through Mexico for the Rio Grande. He treated this like a Russian invasion, first saying he’d send “the military” to the border and then signing an order to deploy the National Guard.

    There was no need. By Thursday the invading horde had largely dispersed before it reached even Mexico City. It isn’t clear most were even heading to the U.S. Mr. Trump conceded on Twitter that “The Caravan is largely broken up” and he credited Mexico’s “strong immigration laws,” which he usually derides.

    He was also back to touting his border-control success: “Because of the Trump Administrations [sic] actions, Border crossings are at a still UNACCEPTABLE 46 year low.”

    Apprehensions were down in fiscal 2017 to 310,531, the lowest since at least 2000. But they were up year over year in February and March, and our guess is that’s due to the strong U.S. economy pulling in more migrants coming for work.

    This underscores the contradiction in Mr. Trump’s economic agenda. Faster growth from tax reform and deregulation means a tighter labor market that attracts more migrants. Mr. Trump would be wise to trade border security for reform that allows more legal immigration to meet the economy’s needs. Then he wouldn’t have to pull stunts like hyping a band of poor migrants as an invading army.

    Appeared in the April 6, 2018, print edition.


    • Mark:

      Copied Right from the Wall Street Journal

      lol…I like that.

      From the article:

      It isn’t clear most were even heading to the U.S.

      Pull the other one.


  4. Interesting the things that the NYT Editorial page will admit to now in order to make the case against Trump:

    “The problem is that, once again, Mr. Trump has an impulse — in this case, he even has the right one — but no strategy, an emotion but little insight into reality on the ground. His call to withdraw troops immediately is at odds with warnings from American commanders who believe that it could lead to a resurgence by ISIS, like the rebound of militants in Iraq after Mr. Obama brought troops home from there.”


    • Are we supposed to use Afghanistan as the model of success?


    • I am so sick and tired of the whole Middle East. We are energy independent for the most part, and the strategic value is bupkis.

      If the Chinese or the Russians want to get involved in that quagmire, let ’em.


      • Seriously. But this “we need to get out!” “what, you’re getting out?” is some BS. But, consult rule 1: principals > principles.


        • When my oldest daughter was in 5th grade they were reading the NYT in class. She wanted to be POTUS someday. NYT was urging RWR to go into Beirut. RWR went into Beirut. 200+ Marines were killed. NYT castigated RWR for going into Beirut.

          My daughter: “I don’t want to be President, any more.”


        • smart girl, Mark


      • The part I found telling was the admission that Obama withdrawing from Iraq had allowed the militants to “rebound”.

        That use to be verboten in progressive circles.


  5. Is it science denial to insist that it is possible to power everything with wind and solar?


    • I didn’t laugh, but after all the dust settles, this is the relevant point:

      “The attack appeared to break the will of Douma’s rebels, who agreed on Sunday to a deal with the government to hand the area over and be bused to another area outside government control in the country’s north. Thousands of fighters and tens of thousands of their relatives are expected to leave soon.”

      Assad does it because it works.

      And my Facebook friends who are part of #TheResistance now are posting that something must be done to stop Assad in Syria. The 180 is complete.


  6. Baby, why you make me hit you?


  7. New quotation in honor of the surrender of Lee, April 9, 1865.


    • What do you think the likelihood would be that Grant & Sheridan would have used chemical weapons to end the war and force a surrender?

      I’m pretty sure I know the answer to that question would be yes.


      • 100% if then legal [obviously they were legal then] or 0% if they had already been declared illegal, in the alternate universe of history happening in a different order.

        Higher than 0% for Sherman if he had access to them under any circumstance.


  8. Joe – WHAT did you find interesting?


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