Morning Report: The economy added 558k jobs in September

Vital Statistics:

 LastChange
S&P futures4,298-35.2
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.

Author: Brent Nyitray

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

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