Morning Report: The economy added 568k jobs in September.

Vital Statistics:

  Last Change
S&P futures 4,298 -35.2
Oil (WTI) 77.99 -0.99
10 year government bond yield   1.52%
30 year fixed rate mortgage   3.21%

Stocks are lower this morning on overseas weakness. Bonds and MBS are down small.


The private sector added 568,000 jobs in September, according to the ADP Jobs Report. This was well above the Street estimate of 428k. The Street is looking for 475k jobs in Friday’s jobs report.

“The labor market recovery continues to make progress despite a marked slowdown from the 748,000 job pace in the second quarter,” said Nela Richardson, chief economist, ADP. “Leisure and hospitality remains one of the biggest beneficiaries to the recovery, yet hiring is still heavily impacted by the
trajectory of the pandemic, especially for small firms. Current bottlenecks in hiring should fade as the health conditions tied to the COVID-19 variant continue to improve, setting the stage for solid job gains in the coming months.”


Mortgage Applications decreased 6.9% last week, according to the MBA. Purchases decreased 2% and refis fell 10%. “Mortgage applications to refinance dropped almost 10 percent last week to the lowest level in three months, as the 30-year fixed rate increased to 3.14 percent – the highest since July. Higher rates are reducing borrowers’ incentive to refinance, as declines were seen across all loan types,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Purchase activity also fell, driven by a drop in conventional loan applications. Government purchase applications were up over 1 percent, but that was still not enough to bring down the average loan balance of $410,000. With home-price appreciation and sales prices remaining very elevated, applications for higher balance, conventional loans still dominate the mix of activity.”  


Chicago Fed President Charles Evans sees the current level of inflation as transitory that will abate as supply chain bottlenecks get worked out. “I’m comfortable in thinking that these are elevated prices, that they will be coming down as supply bottlenecks are addressed,” he told CNBC’s Steve Liesman during a “Squawk Box” interview. “I think it could be longer than we were expecting, absolutely, there’s no doubt about it. But I think the continuing increase in these prices is unlikely.” His point is that the current level of inflation is not a monetary policy issue – it is a supply infrastructure problem.


Fed Chief Jerome Powell has about 4 months left in his term, and Biden has yet to publicly support him for another term. The left is lining up against him however: Powell “poses a danger to our economy and that’s why I oppose him for renomination,” Senator Elizabeth Warren told CNBC on Tuesday, citing what she sees as his overly lax approach to bank oversight as well as his handling of possible investment trading improprieties by fellow Fed policymakers.

20 Responses

  1. Re debt ceiling.

    Is it true that if Democrats have to use reconciliation to raise the debt ceiling, they won’t be able to use it pass the $3.5 trillion spending bill?


    • No, but I’m unclear on if they can do a separate bill or if it all has to be done together.

      It does burn up floor time in the Senate.

      Latest update on it:

      This is the outcome that the Republicans are going for:


    • Found this:

      “Republicans could ease reconciliation for Democrats by yielding back debate time and smoothing the process in committee. Going that route to raise the borrowing limit would also trigger another vote-a-rama, an amendment-voting endurance run that allows the GOP to force a litany of tough votes.

      There could even be two vote-a-ramas, because Democrats have to revise their budget, then pass a debt limit bill. The scope of all Republican amendments would be smaller, however, focusing just on the debt ceiling, and the GOP could make the process less painful by forcing fewer votes.”


      • What reason is there for the GOP to help democrats in any way?

        After their scorched earth tactics in the trump administration (or hell, any R admin) they can FOAD.


        • There is no real world reason. Sure, if it was mutual but it never would be. They’d just be stupid to help people who will turn around and try to have them arrested for domestic terrorism or impeached or something, given half a chance.


        • If the next majority Republican House does not impeach a Democratic POTUS, will elected Democrats interpret that as an olive branch or as weakness?


        • I suspect this is just going to be a replay of judicial nominations. Even after Bork and Thomas the R’s still allowed Ginsburg and Breyer onto the court with barely any opposition…96-3 and 87-9. It wasn’t until the D’s escalated even further under Bush that the R’s finally cottoned on to the fact that the game had changed. (Even now some of them don’t get it.)

          It’ll probably take another impeachment attempt or 2 of R presidents before the R’s start playing by the new rules.


        • Not sure it matters. Let’s just say they don’t impeach Biden (or whomever, if it takes longer for their to be another Republican majority house, if there ever is was)–if they try to wreck the Dem agenda every other way then they’ll still be horrible, terrible people and so desperately hated.

          I think the best strategy would not be to impeach Biden but to attempt to govern as if we simply don’t have a president. It’s not like there would be any difference between Harris and Biden when it comes to vetos. And so far every impeachment has been a waste of time. Total kabuki.

          I don’t think not doing it will be seen as an olive branch, but doing it won’t make much of a difference. I don’t think. But if the Republicans want to do something showy that prevents them from attempting to do anything productive, but will be exciting to some of their voters, it might be a good strategy.


  2. Interesting breakdown of federal spending by month and by fiscal year.

    Worth noting that for August 2021 receipts were $268 billion, outlays were $439 billion which produced a $171 billion monthly deficit. Of that, only $42 billion was for net interest on the debt.

    Despite all the chicken little sky is falling rhetoric, there’s no reason why there should be a default on existing Treasuries when they are presented for redemption. There’s sufficient income coming in to cover that expense. It’s tiresome that the media intentionally conflates defaulting on actual treasury debt with not being able to pay other mandated expenditures.


    • jnc:

      It’s tiresome that the media intentionally conflates defaulting on actual treasury debt with not being able to pay other mandated expenditures.

      Indeed it is. I remember talking about exactly the same thing back during Obama’s debt ceiling fight and the government shut downs that ensued from it.


    • jnc:

      It’s tiresome that the media intentionally conflates defaulting on actual treasury debt with not being able to pay other mandated expenditures.

      A Bloomberg story from this morning is a perfect case in point. The headline was “Senate Poised to Pull Nation Back From Default Brink, For Now”, and the first line in the story read:

      (Bloomberg) — The Senate is nearing a deal on a short-term increase in the debt ceiling that would pull the U.S. from the brink of default but threatens to exacerbate year-end clashes over trillions in government spending.

      So I sent a Bloomberg message to the writer and his editor (each Bloomberg article comes with a handy link at the end for exactly this purpose) pointing out that it wasn’t true, and explained how the debt ceiling could never prevent the government from rolling over debt to make principle payments, while also pointing out that monthly tax revenues are 10 times the size the monthly cost of interest on the debt.

      The author wrote back to me saying simply that he updated the story to make it clearer. So I re-opened the article and this is what the first line now says:

      The Senate is nearing a deal on a short-term increase in the debt ceiling that would pull the U.S. from the brink of a payment default but threatens to exacerbate year-end clashes over trillions in government spending.

      No other changes we made other than the addition of the word “payment”. That’s “clearer”!?! So I wrote back and pointed out that the claim he was making was still false. He replied by simply saying “our definition of payment default is failing to meet any payment obligation such as payment of federal worker salaries or government benefits.”

      Conveniently, Bloomberg terminals allow you type in any word and get a “Bloomberg definition” for that word. So I pointed out to him that if he did this, he would find that his very own employer defines the word “default” as “The failure to pay interest or principle on a loan or security when due”, and that his story was clearly deceptive. At this point his editor chimed in and said that they “always strive for clarity”, and that since “default” was the terminology used by the GAO and the White House to refer to a failure to make any government payment, that is what they meant.

      Always strive for clarity? He’s a lying sack of shit. Clearly they are working overtime to avoid clarity. These media organizations are just filled with partisan, activist hacks.


      • That’s a great exchange Scott! Insightful and funny!


      • Yeah, it’s all propaganda at this point. But I think the general public has largely tuned it out.


      • Not at all surprising. But honestly even if they aren’t being partisan hacks, they are lazy and very . . . casual . . . about their work. Even if not actively being deceptive for partisan reasons, it doesn’t seem like that have much interest in being accurate any more. There’s no rigor–not in maintaining the pretense of avoiding bias, but also not in the “being accurate” or “checking sources” or “looking up the definition of words” meaning.

        I would bet good money there are areas that are largely apolitical where the usage of a word has not matched the official Bloomberg definition and it wasn’t caught, or nobody cared, or they used the same “well, that’s how organization X is using it so we will use it that way to” excuse.


  3. Good read:

    “Did Political and Media Bias Stall the Release of Merck’s New Covid-19 Drug?

    Former HHS officials say they tried to accelerate funding for what became Merck’s new “miracle” drug last year, but were blocked. How culture-war stupidity may have cost “tens of thousands” of lives

    Matt Taibbi”


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