473,000 vs. 498,000

That’s the difference between what the “market” expected as far as the ADP private sector jobs report and what we got.   They expected 498,000 and we got 473,000.    We didn’t get 473,000 new jobs, we got 473,000 losses.   

What does this mean for the markets?

• Frankly, I’m not expecting it to have a lot of impact on mortgage rates today.    Statistically, the ADP report is not the most accurate, so the difference of 5% between the expectation and the reality is probably not a market mover.
• Due to the fact that it came in better than expected, if it does have any reaction, it will push mortgage rates up.

I’ll write more as I have the chance.

Thanks,

Tom Vanderwell

ADP Employment Report

ADP Employment Report

A couple of key things to notice about the ADP report:

• It’s typically more volatile (inaccurate) than the official government one on Friday.
• It shows that the pace of job loss has stabilized.    We’re still losing 500,000 jobs a month which is a staggering number when you think about it, but it’s not getting worse.
• The April numbers were revised downward by over 10% from the original reports
• The markets are expecting a similar number (500K) on Friday.

So, what does this mean?

1. We aren’t out of the woods on job losses yet.
2. But the world isn’t approaching meltdown status like it was early last fall.   Its just a really lousy economy.

My expectation is that these reports will have relatively little impact on mortgage rates for two main reasons:

• The markets are more concerned with the government’s borrowings than the economic reports in many ways.
• Reports that come in “in line” with expectations rarely have a substantial impact on the bond market and/or mortgage rates.

Stay tuned, while our rates have been very stable, the underlying volatility is immense.

Tom Vanderwell

Private sector cuts 532,000 jobs in May, ADP says – MarketWatch

WASHINGTON (MarketWatch) – The U.S. private sector eliminated 532,000 net jobs in May, the fewest jobs lost since November, according to the ADP employment index released Wednesday.

Goods producing industries cut 267,000 jobs while services cut 265,000.

The index comes two days before the government releases its estimate of May nonfarm payrolls. Economists surveyed by MarketWatch are looking for payrolls to drop by 500,000 in the government survey, which would be the smallest decline since October.

The ADP index does not include government jobs. To get an apples-to-apples comparison with the Labor Department report, you have to add in about 13,000 jobs typically gained in the public sector. That suggests total payrolls fell by about 545,000 in May, compared with the MarketWatch consensus of 500,000 for the Labor Department’s estimate.

The April ADP index was revised to a decline of 545,000 from a decline of 491,000 previously reported.

ADP Employment Report

Jobs – a prelude to Friday…..

This jobs report is not nearly as accurate or as widely relied upon as what the “official” one on Friday will be, but it did come in significantly “less bad” than expected.

We’ll be talking between now and Friday about jobs and how that might impact mortgage rates.

Stay tuned….

Tom Vanderwell

Private-sector jobs fall by 491,000 in April: ADP – MarketWatch

Private-sector employment in the United States fell by 491,000 jobs in April, the smallest decline in six months, according to the ADP employment index released Wednesday.
The relative improvement was widespread across industries, said Joel Prakken, chairman of Macroeconomic Advisers, the consulting firm that computes the index for payroll giant Automatic Data Processing Inc. from hundreds of thousands of anonymous payroll reports. Read the full report.

ADP Employment, Jobs

A few thoughts about the jobs report from ADP

First, it’s an ugly number, the worst that ADP has reported in the last 9 years.
Secondly, it’s a number that has been subject to substantial revisions over the years.
Thirdly, if it is a precursor to Friday’s jobs report, it’s going to show that March was an uglier month than the stock market would lead you to believe.

So what does this mean for the mortgage world?  Probably not a huge amount, but I think it’s going to do a couple of things:

• Put some pressure on the stock market and take some steam out of the rally the market has seen.
• Put additional pressure on the financial institutions that are already faltering.

Stay tuned for Friday’s jobs report.   it will be a big one.   I’ll have more on that later.

Tom Vanderwell

Private-sector cuts 742,000 jobs in March, ADP says – MarketWatch

U.S. labor market worsened again in March, as private-sector firms cut 742,000 jobs in March, signaling another terrible employment report on Friday, according to the ADP employment index released Wednesday.
It was the largest job loss recorded by ADP in its nine-year history.
The report comes two days before the Labor Department reports its estimate for nonfarm payrolls. Economists were looking for nonfarm payrolls to fall by 663,000.
In March, the goods-producing sector shed 327,000 jobs, the 27th consecutive decline. Manufacturing lost 206,000 jobs, while construction lost 118,000.
The services sector lost a record 415,000 jobs.

ADP Employment Report

ADP Employment Report

Nonfarm private employment decreased 693,000 from November to December 2008 on a seasonally adjusted basis, according to the ADP National Employment Report®.

ADP Employment Report.

Tom here – the really important jobs number comes tomorrow morning at 8:30 with the “official” jobs report but with the ADP report coming in at a negative 693,000, that doesn’t bode well for tomorrow.

How are the markets going to react?  Here’s my guestimate:

1. The stock market is going to see a really bad number (over 500,000 jobs) as a reason to sell off.
2. The money leaving the stock market is going to be looking for somewhere to go and is going to go into Treasuries, increasing the difference between mortgage backed securities and the bond market.
3. The really bad news economically (and we’ve seen some of it lately) is going to increase the call for stimulus packages which could add lots of additional costs to the Federal government’s already mounting bill.

So, long story short, here’s my estimate of what’s going to happen tomorrow:

• The jobs report will come in really ugly.
• The markets will tank even more.
• Mortgage rates will remain stable or inch up just a small amount.

Going to be an interesting day tomorrow.

Tom Vanderwell