ADP Shows 33k Lost Jobs In August, Rates May Drop Further

Today, ADP, a provider of payroll services to more than 24 million Americans employed in the private sector, released their monthly jobs data which showed that the economy lost 33,000 jobs in August. The expectations were for a loss of 30,000 jobs. ADP reports have been way off in previous months relative to the official government jobs report produced by the Bureau of Labor Statistics. For example, July ADP showed +9000 jobs and July BLS showed -51,000 jobs.

Expectations on tomorrow’s BLS report call for -75,000 jobs. The jobs report has a large impact on markets, and mortgage rates always move on this report since it’s such a broad measure of the economy, covering consumer strength, unemployment and wage inflation. We think the job loss trend will continue as measured by the BLS report, and that rates will be the same or lower. It’s hard to bet that rates will go too much lower because mortgage bonds are overbought this week following a drop in oil prices. The only thing supporting a bet rates will drop further is that the stock market is selling off on fears of economic weakness. The bond complex (including mortgage bonds) benefits when this happens—when bond prices rise in a rally, yields (or rates) drop.