Solid ADP data hints at strong jobs market: Was 50 too much, Jay?

Reuters

Solid ADP data hints at strong jobs market: Was 50 too much, Jay?

2024 10월 2, 오후 3:48 GMT

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Main U.S. indexes modestly green; Nasdaq out front, up ~0.3%

U.S. 10-Year Treasury yield rises to ~3.80%

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SOLID ADP DATA HINTS AT STRONG JOBS MARKET: WAS 50 TOO MUCH, JAY?

Wednesday's economic data suggests the labor market is more solid that suspected, and would-be home loan applicants are not at all interested in higher mortgage rates.

Private U.S. employers increased their headcount by 143,000 jobs in September, according to payrolls processor ADP's National Employment index USADP=ECI.

That's a 38.8% improvement over August and hits 14.4% north of the 125,000 private sector job adds analysts expect the Labor Department's official private payrolls data to show on Friday.

Calling ADP "a poor guide" to nonfarm payrolls data, Sam Tombs, chief U.S. economist at Pantheon Macroeconomics says "hiring intentions index of the NFIB small business survey, the Conference Board survey’s measure of the share of people saying jobs are plentiful less those saying they are hard to get" are better predictors of official data.

Nevertheless, stronger-than-expected labor market data hints at the possibility that Powell & Co's double-dip 50 basis point interest rate cut wasn't entirely warranted, and could help limit the size and frequency of further rate cuts this year.

The graphic below shows ADP's track record as a private payrolls predictor:

Separately, the cost of financing home loans ticked up a tiny bit last week, which had a slight overall dampening effect on mortgage demand.

The Mortgage Bankers Association's (MBA) report showed the average 30-year fixed contract rate USMG=ECI warmed up by one barely noticeable basis point, to 6.14% from 6.13%, its first increase since early July.

And while applications for loans to purchase homes USMGPI=ECI increased by 0.7%, the refi side USMGR=ECI moved in the opposite direction, dropping 2.9%.

Taken together, the mortgage index shed 1.3%.

"The news for the week was that more homebuyers appear to be entering the market," says Mike Fratantoni, chief economist at MBA. "Inventories of both new and existing homes have been increasing over the course of 2024, meaning that potential buyers have properties to look at and now have somewhat lower mortgage rates leading to better affordability."

As seen below, the 30-year fixed rate is now 1.39 percentage points cooler than it was in the same week a year ago.

Over the same time period, purchase applications - considered a forward-looking housing indicator - have increased 9.3%. Meanwhile, refi demand has shot up by 185.9%.

(Stephen Culp)

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