Morning Report: The economy added 750k jobs in September

Vital Statistics:

 LastChange
S&P futures3330-3.6
Oil (WTI)39.05-0.19
10 year government bond yield 0.65%
30 year fixed rate mortgage 2.89%

Stocks are flattish this morning despite some positive economic data. Bonds and MBS are flat.

The final revision for Q2 GDP came in at -31.4%. Personal Consumption Expenditures fell by 34.1%.

The ADP Jobs report indicated the economy added 749,000 jobs in September, which was higher than the 650k expectation. The Street is looking for 900k jobs in Friday’s report. Note that the ADP numbers have been coming in well below the actual BLS numbers. Meanwhile, companies like Disney and mall operator Brookfield are shedding jobs.

Mortgage Applications fell 5% last week as purchases declined 2% and refis fell by 7%. “Despite the decline in rates, refinances fell over 6 percent, driven by a 9 percent drop in conventional refinance applications,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “There are indications that refinance rates are not decreasing to the same extent as rates for home purchase loans, and that could explain last week’s decline in refinances. Many lenders are still operating at full capacity and working through operational challenges, ultimately limiting the number of applications they are able to accept.” 

A group of about 85,000 landlords filed a suit challenging the Center for Disease Control’s edict to ban evictions.

New York Fed President John Williams thinks it will take about 3 years to get back to full employment. When asked about the Fed’s 2% inflation target, he responded: “We need to make sure that we’re purposely overshooting that moderately for some time to get that balance,” Williams told reporters. “To me, success is not some arithmetic or some formula but it’s really this notion of inflation expectations, how people think about what’s inflation going to be in the future.” The Fed is desperately trying to avoid what Japan has experienced, which is deflationary expectations being anchored for a generation. Young people in Japan are notorious savers, and consumption drives the economy.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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