2/4/2015
By Jennifer Coombs

Domestically, our markets are struggling to digest the disappointing jobs data released by ADP and gives a gloomy outlook for the Bureau of Labor Statistics data. ADP anticipates slowing in job growth for January, reporting a lower-than-expected 213,000 for private payrolls versus consensus for 220,000 and against ADP's upwardly revised 253,000 for December (initial estimate 241,000). Turning to government data, the corresponding consensus estimates for Friday's jobs report is 229,000 versus December's 240,000. 

We learned that there wasn’t much of a robust change in mortgage activity last week. According to the Mortgage Bankers Association (MBA), low mortgage rates have yet to trigger a real increase in demand for home purchases, as the level of purchase applications declined by 2.0% in the week ended January 30^th, marking the third straight week of declines. The year-on-year rate, however, has been positive, at a modest 3.0% in the latest week. Mortgage rates for 30-year conforming loans ($417,000 or less) have come down even further, by 4 basis points to 3.79%. We also note that this is the lowest rate since May 2013.

The Institute for Supply Management (ISM) noted that there wasn’t much change over last month in terms of service-related business activity in the US. Growth in the non-manufacturing purchasing managers’ index (PMI) held steady, yet solid, at a reading of 56.7 for January, compared to a revised 56.5 in December. The index’s peak post-recession level was at 59.6, but averaged about 57.2 over the last four months. This is still positive as non-manufacturing business remains in expansionary mode.

Within ISM’s report, the new orders component came in at a solid 59.5, and points to sustainable and strong growth rates in the coming months. Employment, as was also noted in the manufacturing PMI report, is a weak point for the month. It dropped by a sharp 4.1 points to 51.6. This is the lowest rate of monthly growth since April 2014. Input prices, thanks to low inflation and low oil prices, which came in at 45.5, are on the negative side of the breakeven level (50) for the second straight month and making this their sharpest rate of contraction since July 2009. Another noteworthy weak spot was the lack of breadth across all industries; 8 reported expansion, while 8 reported contraction. On the expansion side was activity in the accommodation & food services sector, which points to higher discretionary spending in the month. On the contractionary side was mining and construction activity. Though there are negatives, including the slowing in employment, ISM’s overall report is solid.

Jennifer Coombs
Wall Street Strategies

Add a Comment!