Weaker employment data – The Daily Tearsheet


Vital Statistics:

Stocks are lower this morning on no real news. Bonds and MBS are down.

Jerome Powell reiterated his position that the Fed should remain on hold until we have further clarity on tariffs, and said that September would be the most appropriate time to consider a move. He also said that absent the tariff issue, the Fed would be cutting rates already. Donald Trump responded with a chart of short term rates in the rest of the world and berated Powell for being too late.

More signs that the labor market is weakening: The private sector shed 33,000 jobs in June, according to the ADP Employment Report. “Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” said Dr. Nela Richardson, chief economist, ADP. “Still, the slowdown in hiring has yet to disrupt pay growth.”

The job cuts were primarily in white collar jobs: professional / business services and finance. Blue collar professions like construction and manufacturing gained. Wage gains for job stayers eased to 4.4% from 4.5%.

In other employment related indicators, the JOLTS jobs report showed that job openings increased, primarily in leisure / hospitality. Outplacement firm Challenger, Gray and Christmas reported that companies announced 48,000 job cuts in June. “The bulk of companies cited economic conditions last month. We saw some DOGE activity and have tracked over 2,000 jobs directly attributed to tariffs this year, but for the most part it was a quiet June,” said Andrew Challenger, Senior Vice President and labor expert for Challenger, Gray & Christmas.

National home prices rose 2.0% on a QOQ basis and 3.5% on a YOY basis according to the Clear Capital Home Data Index. Home price appreciation moderated in June, according to the Clear Capital Home Data Index. National home prices rose 2.0% on a quarterly basis and 3.5% annually. The Northeast and the Midwest continue to outperform, while the previously hot markets in Florida and the Sunbelt struggle. 

Mortgage applications rose 2.7% as purchases rose 0.1% and refis increased 7%. “Mortgage rates were lower across all loan types last week, with the 30-year fixed rate declining to its lowest level since April at 6.79 percent. This decline prompted an increase in refinance applications, driven by a 10 percent increase in conventional applications and a 22 percent increase in VA refinance applications,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As borrowers with larger loans tend to be more sensitive to rate changes, the average loan size for a refinance application increased to $313,700 after averaging less than $300,000 for the past six weeks. Purchase activity was essentially flat over the week, as overall uncertainty continues to hold homebuyers out of the market. However, purchase activity still remains 16 percent higher than last year’s pace.” 

Manufacturing activity continued to contract, according to the ISM Manufacturing Report, although it ticked up from May. Companies seem to be in a holding pattern regarding the potential impact of tariffs.

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