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Wednesday, January 5, 2011

ADP: Employment Is Good. (Also, Other Metrics)

Starting in Europe, the European Union reported its November PPI around 5 AM EST today. October saw a 0.4% increase (for a 4.4% increase year over year), and the consensus expectation was for an additional 0.1% increase (keeping the year over year figures flat). The EU actually came in at a 0.3% increase, bringing the year over year PPI to 4.5%. Not great, but not terribly bad.
Hopping across the Arctic to Our Neighbors to the North, Canada has released its Industrial Product Price Index (IPPI). Which has missed expectations. For November, analysts were expecting to see a 0.3% increase, and they actually had a 0.5% increase. Oddly, however, their year over year IPPI has declined 20 bps to 2.1%, so investors probably won't take this all that badly.
Here in the states, the Mortgage Bankers Association released its Weekly Mortgage Applications Survey figures for the week ending 12/31. The Market Composite Index (which measures margin loan application volume) was up 2.3% for the week, while the Refinance Index (which tracks refinancing volume) was up 3.9% and the Purchase Index (which tracks volume for first-time mortgages) was down 0.8%. Refinancing made up 71.0% or all mortgage activity for the week, and the average contract interest rate for 30-year fixed-rate mortgages fell to 4.82%.
The implication is that we're starting to find ourselves in a more favorable interest rate environment and that banks are more willing to refinance, but that that we may be expecting home sales to remain soft. Still, while interesting, this report isn't a huge deal for the markets.
ADP has released its monthly National Employment Report for December, and the word is, well, surprisingly good. November saw 92,000 new nonfarm private sector jobs (revised downwards from the original release of 93,000, but we can live with that[1]) . The Street doesn't make predictions for this one, so I'll just go ahead and tell you that ADP sees nonfarm private-sector employment increasing by 297,000 in December. Here's the breakdown:
  • Service sector jobs increased by 270,000[2], the single largest monthly increase in the history of the report. Financial services, a subset of this sector, shed 8000 jobs.
  • Goods-producing sector jobs rose 27,000. As a subset of this, manufacturing sector jobs increased 23,000 and construction sector jobs remained unchanged (meaning they didn't drop for the first time since June 2007)
  • The greatest gains came from medium businesses, which hired 144,000 new employees. Small businesses hired 117,000, and large businesses hired 36,000.
At 10 AM EST we're looking for the Institute for Supply Management's Non-Manufacturing Index. This tracks the health of all of the various sectors of the US economy that aren't factories - agriculture[3], mining, construction, retail trade, whatever. Just so long as it doesn't come from a factory. Anything over 50% is considered a growing economy. November had a 55%, and we're looking for a 56% for December.
Then at 10:30 EST, we get the Energy Information Administration's weekly figures on petroleum inventories. This has an inverse impact on oil prices in the US - if supplies are increasing, prices tend to fall (and vice-versa). It's not a huge market mover, but commodities traders and people who invest in oil stocks tend to like it.
[1] Unless you're one of the 1000 people revised downwards, anyway.
[2] No word on how many of these are seasonal jobs, though, so this could be a fluke driven by the Holiday shopping season. I'm not saying it is, since I don't know. I'm just saying that January's employment situation report could be a letdown in the face of this explosive growth.
[3] Yeah, yeah, factory farming. Doesn't count.

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