Big downward revision in payrolls – The Daily Tearsheet

Vital Statistics:

Stocks are higher this morning after Oracle gave a rosy forecast. Bonds and MBS are flat.

Inflation at the wholesale level declined in August, according to the Producer Price Index. On a year-over-year basis, wholesale prices rose 2.6% YOY. If you strip out food and energy, wholesale prices fell 0.1% and rose 2.8% YOY. Finally, if you pull out food, energy and trade services, wholesale prices rose 0.3% MOM and 2.8% YOY.

The decline was primarily attributable to a drop in trade services, which can be thought of as the margin that retailers and wholesalers earn. This drop indicates that retailers and wholesalers are unable to pass on tariffs and are absorbing them. This could be a warning signal for Q3 earnings for the big retailers.

The last hurdle to a rate cut next week is the Consumer Price Index tomorrow.

The BLS released its benchmark revision yesterday, and payroll growth from April 24-March 25 was revised downward by 911,000 jobs. The amount of jobs created was roughly half of what was initially reported. The average monthly job creation as reported was 147k. That is a good number. This was revised downward to around 71,000. This is a “meh” number at best. The Fed has characterized the job market as “solid” and “robust” in the past. These numbers would generally fall into “moderate” or “modest” category.

Mortgage applications increased 9.2% last week as purchases rose 7% and refis increased 12%. There was an adjustment for the Labor Day holiday. “Mortgage rates declined for the second consecutive week as Treasury yields moved lower on data indicating that the labor market is weakening. The 30-year fixed rate decreased to 6.49%, down 20 basis points over the past two weeks to the lowest since October 2024,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The downward rate movement spurred the strongest week of borrower demand since 2022, with both purchase and refinance applications moving higher. Purchase applications increased to the highest level since July and continued to run more than 20% ahead of last year’s pace. There was also a pickup in ARM applications, both in terms of level and share, as ARM rates were considerably lower than fixed rate loans, which typically benefits homebuyers.”

Added Kan, “The holiday-adjusted refinance index had its strongest week in a year and the average loan size for refinances also increased significantly, since borrowers with large loans are more sensitive to bigger rate moves. Refinance applications accounted for almost 49% of all applications last week.”

Judge Jia Cobb (a Biden appointee) temporarily blocked the removal of Fed Governor Lisa Cook. “President Trump has not identified anything related to Cook’s conduct or job performance as a Board member that would indicate that she is harming the Board or the public interest by executing her duties unfaithfully or ineffectively,” Cobb wrote in her ruling.

This issue of course is mortgage fraud, not anything she did while on the Board of the Fed. It all will hinge on the definition of “cause.” Does that exclude all activities that are not job-related? Could a Fed Governor be immune if they had a DUI?

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