Vital Statistics:
Stocks are lower this morning after 50% tariffs on steel and aluminum go into effect. Bonds and MBS are up.
The private sector added only 37,000 jobs in May, according to the ADP Employment Report. This is well below the consensus of 110,000, and the 129,000 expectation for Friday’s jobs report. “After a strong start to the year, hiring is losing momentum,” said Dr. Nela Richardson, chief economist,
ADP. “Pay growth, however, was little changed in May, holding at robust levels for both job-stayers and job-changers.”
I am sure tariff uncertainty played a part, with employers holding off on adding people until there is further clarity, however there is a possibility that the Fed stayed too long at the party and has started to push the economy into a recession.
Job openings increased from 7.2 million to 7.4 million, according to the BLS. On a year-over-year basis, job openings fell from 7.6 million. The quits rate fell from 2.1% to 2.0%, which signals that wage inflation is going to moderate.
Mortgage applications fell 4% last week as purchases and refis fell by the same amount. There was an adjustment for the Memorial Day holiday. “Most mortgage rates moved lower last week, with the 30-year fixed rate declining to 6.92 percent and staying in the 6.8 percent to 7 percent range since April,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Mortgage applications decreased over the week but continue to exhibit annual gains, with purchase applications running 18 percent ahead of last year’s place. Government purchase applications were little changed over the week driven by a slight increase in FHA purchase applications. Refinance activity fell across both conventional and government segment and the overall average refinance loan size was the smallest since July 2024, as potential borrowers hold out for larger rate drops.”
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The services economy improved in April, according to the ISM Services Index. This was largely a reversal of March’s decline which was driven by tariffs. New orders improved, while activity slowed. The prices index increased, driven by tariffs.
“April’s change in indexes was a reversal of March’s direction, with increases in three (New Orders, Employment and Supplier Deliveries) of the four subindexes that directly factor into the Services PMI®. Of those four, only the Business Activity Index had a lower reading compared to March. Employment continues to be the only one of these subindexes in contraction territory, with two straight months of contraction. From December through February, all four subindexes were in expansion. Regarding tariffs, respondents cited actual pricing impacts as concerns, more so than uncertainty and future pressures. Respondents continue to mention federal agency budget cuts as a drag on business, but overall, results are improving.”
