Morning Report: The economy continues to add jobs

Vital Statistics:

S&P futures3,743-59.75
Oil (WTI)86.590.02
10 year government bond yield 3.77%
30 year fixed rate mortgage 6.59%

Stocks are lower as markets adopt a risk-off posture again. Bonds and MBS are down.

The economy added 208,000 jobs in September, according to the ADP Employment Report. Annual pay was up 7.8% on a YOY basis, which will concern the Fed. That said, the pay increase for job changers is beginning to decline. This would comport with the stagnant quits rate we saw in yesterday’s JOLTs report.

The report also noted that it looks like people are returning to the labor market. Demand remains strong from employers. Private employment recently returned to pre-pandemic levels.

The service economy expanded again in September, according to the ISM Services Index, albeit at a slower pace than August. Most of the sub-indices showed declines, although employers still struggle to find employees. The prices index declined as well, which is good news on the inflation front.

“According to the Services PMI®, 15 industries reported growth. The composite index indicated growth for the 28th consecutive month after a two-month contraction in April and May 2020. Growth continues — at a slightly slower rate — for the services sector, which has expanded for all but two of the last 152 months. The services sector had a slight pullback in growth for the month of September due to decreases in business activity and new orders. Employment improved and supplier deliveries slowed at a slightly slower rate. Based on comments from Business Survey Committee respondents, there have been improvements regarding supply chain efficiency, operating capacity and materials availability; however, performance remains less than ideal. Employment continued to improve despite the restricted labor market.”

Higher interest rates continue to depress the mortgage market. Applications fell 14% last week as purchases fell 13% and refinances fell 14.2%. On a YOY basis, purchases are down 37% and refis are down 86%.

“Mortgage rates continued to climb last week, causing another pullback in overall application activity, which dropped to its slowest pace since 1997. The 30-year fixed rate hit 6.75 percent last week – the highest rate since 2006,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The current rate has more than doubled over the past year and has increased 130 basis points in the past seven weeks alone. The steep increase in rates continued to halt refinance activity and is also impacting purchase applications, which have fallen 37 percent behind last year’s pace. Additionally, the spreads between the conforming rate compared to jumbo loans widened again, and we saw the ARM share rise further to almost 12 percent of applications.”

10 Responses

  1. Interesting perspective on the IMF & Britain.

    “Is This the End of ‘Socialism for the Rich’?

    The IMF’s rebuke of Britain for tax cuts that will “increase inequality” is probably not the come-to-Jesus moment it might seem.

    By Yanis Varoufakis”

    Varoufakis sounds a bit like David Stockman now.


    • Or the left has captured the IMF like they have captured every other NGO and is now talking the ideological catechism.

      The tax cuts “for the wealthy” is the giveaway

      Occam’s Razor.


      • There is the inherent assumption that tax cuts for the wealthy and wealth inequality are bad for a country’s economy and I don’t think there’s actually a lot of evidence for that. Not that tax cuts for the rich make the overall economy better or that wealthy inequality always comes with an improvement in all circumstances but I just don’t see any evidence that suggests the IMF had to step in and chide the UK for cutting taxes in ways that would help rich people.


        • The left has that annoying rhetorical tic of claiming tax cuts for all = tax cuts for the rich. They fundamentally hate tax cuts to begin with. They want big taxes and big redistribution. As a general rule, the muliplier effect for tax cuts is 3, while the multipler for spending is zero.

          The only thing the left can point to about inequality is general happiness, which come from surveys conducted by people who, unsurprisingly are in the business of advocating for a massive welfare state. If the Finns are so happy why do they drink like fish?

          The studies should be taken with a huge boulder of salt.


        • My theory is reported happiness has a lot to do with cultural homogeneity. Feeling at “home” in your country creates a sense of well-being even when the economy isn’t great. Or your taxes are high.


        • I really wish Republicans would push a giant-ass tax cut for households making under $250k a year, with another cut for those making under $125k a year (or something like that), if for no other reason than to make the Democrats fight against it. Or just do the under $125k tax cut—a huge one—-and make the Democrats fight against it. Do a tax cut for all or for rich people later. Just once do a very visible tax cut for the middle-class and under, all of them, and make the democrats argue against it.


  2. This is true genius as a political ad:


    • the alternative is a dude who sponged off of his parents until he was almost 50 though.


    • It’s a brilliant ad but and in some ways Fetterman is untouchable on his greatest weakness—his stroke—but he also can’t hide it. Oz is not a great candidate. But neither is Fetterman, awesome ads aside.


  3. Radley Balko’s substack is up now:

    “The maddening irrelevance of Charlie Vaughn’s innocence

    A severely intellectually disabled man has spent more than 30 years in an Arkansas prison. The system doesn’t care if he’s actually guilty.

    Radley Balko”


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