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Job growth remains robust – The Daily Tearsheet

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Vital Statistics:

  Last Change
S&P futures 4,139 -32.25
Oil (WTI) 117.05 0.64
10 year government bond yield   2.97%
30 year fixed rate mortgage   5.42%

Stocks are lower this morning as investors fret about a slowing economy. Bonds and MBS are down.

The economy added 390,000 jobs in May, which was above Street expectations and the 129,000 increase ADP reported yesterday. The unemployment rate was steady at 3.6%. Average hourly earnings rose 5.2% on YOY basis. The usual suspects (leisure / hospitality and health care) increased employment, while retail fell. Retailers have been warning about consumer spending, so the number seems to fit.

Payrolls are close to pre-pandemic levels, but aren’t quite there yet.

The services economy expanded at a slower rate in May, according to the ISM Services Index. This is the lowest reading in the past year. “According to the Services PMI®, 14 industries reported growth. The composite index indicated growth for the 24th consecutive month after a two-month contraction in April and May 2020. Growth continues — albeit slower — for the services sector, which has expanded for all but two of the last 148 months. The sector’s slowdown was due to a decline in business activity and slowing supplier deliveries. The Employment Index (50.2 percent) returned to expansion territory, and the Backlog of Orders Index grew, though at a slower rate. COVID-19 continues to disrupt the services sector, as well as the war in Ukraine. Labor is still a big issue, and prices continue to increase.”

Home Prices accelerated in May, according to the Clear Capital Home Data Index. Overall prices rose 8.9% quarter-over-quarter and almost 22% YOY. The Sun Belt and Florida are the big winners, with prices in Phoenix rising 38% and Tampa rising 40%. Interestingly, the Northeast had the fastest quarterly rise. The Northeast and Midwest have lagged the rest of the market since the 2008 bust, so maybe there are some signs of life there.

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