Happy Birthday, America! 250 Years Young

Holiday Week, Big Data

Americans around the globe are celebrating the 250^th anniversary of the brave men who signed their own death warrant to break away from the most powerful nation in the world to give “We the People” freedom. The American experiment isn’t perfect, but it is ours. We at Sunrise Economix hope you have a safe and enjoyable Independence Day weekend. 

This week was shortened due to the holiday, with markets closing early on Thursday and closed all day Friday. Despite fewer days, a significant amount of market-moving economic news was released. Job Openings and Labor Turnover (JOLTS) came out for May. Home price appreciation data for April was released by Case-Shiller. ADP and the Bureau of Labor Statistics (BLS) both released their June Employment Reports.

JOLTS Signals Slower Hiring

JOLTS for May showed 7.6 million job openings, about 300,000 more than estimates, but at the same level as April. The World Cup definitely influenced this number, with large openings showing in the Leisure/Hospitality and Accommodation/Food Services sectors. Despite the strong headline number, there was a good bit of weakness. The hiring rate remained at 3.3%, just off the lowest level since 2011 (excluding the COVID-19 pandemic), which was 3.1%. The quit rate remained at 1.9%, the lowest level since 2014 (excluding the COVID-19 pandemic), and shows a lack of voluntary job quitting and poaching from other companies. 

Home Prices Hold Steady

Home price appreciation for April showed strong gains in the raw, non-seasonally adjusted numbers. After the seasonal adjustments, the readings were relatively flat. Case-Shiller showed a 0.8% rise in April after a 0.7% rise in March. That is a combined 1.5% over two months and is very strong. This is expected due to seasonal market swings, so after making those adjustments, the results were unchanged. Annually, home values are up close to 1.0%. 

Private Hiring Cools

ADP released its June Employment Report for private payrolls, showing 98,000 jobs were created, weaker than the 110,000 expected. This comes after relatively strong numbers the past couple of months. Job growth was spread among businesses of different sizes, which is good. Half of the jobs came from Education and Health Services, which aren’t economically dependent sectors. It appears the increases from the World Cup have ended.

Jobs Report Shows Weakness

The BLS released its June Jobs Report. The headline number on the Business Survey was only 57,000 new jobs, about half of market estimates. There was also a combined prior 2-month revision of 74,000. As we have discussed repeatedly, the pattern of strong reports and large negative revisions continues here. This should be favorable to interest rates.

To be fair, our skepticism regarding the accuracy of the BLS’s reporting of overstated numbers should also apply to this month. This month’s number could be inaccurately low. We will have to watch and see if the pattern continues. Just like ADP, the Education and Health sector was the main contributor to job growth, adding 69,000 jobs. That means all other sectors lost a combined 12,000 jobs.

Unemployment Rate Misleads

The Household Survey, which derives the unemployment rate, showed that the rate declined from 4.3% to 4.2%. That sounds like good news, but the decline was for bad reasons. The unemployment rate is calculated by dividing the number of unemployed individuals who are actively seeking work by the total labor force. This survey showed 507,000 job losses. This should have increased the unemployment rate, but there was also a 720,000 drop in the labor force.

Since the labor force dropped more than the job losses, the rate went down. It went down due to economic weakness. Within the jobs lost in the survey, 514,000 were full-time, and 53,000 were part-time. Again, this is not good economic news. This is good news for interest rates.

Looking Ahead: Next Week Looks Quiet

• Tuesday, July 7: ADP Weekly Employment Data
• Wednesday, July 8: 10-year Treasury Auction, Federal Reserve meeting minutes
• Thursday, July 9: Jobless Claims, Existing Home Sales, 30-year Treasury Auction