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6/3 - 6/7

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Manufacturing Data

NYT Pushes False Renting Narrative

The S&P Global Manufacturing Index rose from 50 to 51.3, which was stronger than the ​50.9 expected. But this is the global index, and we have seen some stronger readings ​from the ECB.

Just looking at the US manufacturing picture - The ISM Reported their Manufacturing ​Index for May, showing the overall index fell from 49.2 to 48.7, which was weaker than ​estimates of 49.6 and in contraction.

New orders were weak, falling from 49.1 to 45.4 and are now in deeper contraction. ​Prices fell from 60.9 to 57, which was lower than the 60 estimate and is a good thing for ​inflation.

The one part of the report that was stronger was employment, which rose from 48.6 to ​51.1, which was stronger than the 48.5 anticipated and is back into expansion territory, ​albeit slightly. Also, remember this is just for manufacturing employment, which has been ​weak.

The New York Times is back at it again, trying to push their rental calculator and ​explaining that it’s better to rent vs buy, and with the monthly savings and down ​payment/closing costs savings, you would be better off investing that at a ​historical 7% rate of return.

When breaking it down, we took the down payment and closing costs, which you ​have to subtract out what a renter would have to put down for a security deposit ​and did 7% return over 9 years. We then looked at the monthly payment ​differential each year and did a 7% return over 9 years. But the monthly payments ​start to get cheaper to buy over time as renewal rents continue to go up.

Bottom line – it ends up being roughly $190,000 better buying vs renting when ​factoring everything in and doing the math correctly.


The April JOLTS data showed that job openings continued to contract – Job openings totaled 8.059M, which was much lower than the 8.34M expected. Additionally, ​the report for March was revised lower from 8.488M to 8.355M. This is the lowest level of job openings since Feb 2021.

Leisure and hospitality openings fell 109,000, which is significant because this is the area where we have seen the most job growth.

The Quit rate remained at 2.2% for the sixth month in a row, which is still at the lowest level since 2018 when removing Covid. This shows some weakness in the labor ​market, as a lower quit rate means less people feel confident about getting a new job/less poaching from other companies.

Bottom line – this was a weak report and exactly what we wanted to see. Let’s hope this translates to a disappointing ADP and BLS Jobs Report and that the ​unemployment rate surprises to the upside and rises to 4%.

CoreLogic Home Price Insights / Black Knight HPI

CoreLogic reported that home prices rose a very strong 1.1% in April, following a 1.2% rise in March, showing that home price appreciation is very strong. CoreLogic ​forecasted that it would rise by 0.8%, so they were conservative once again.

Year over year, home prices are now up 5.3%, which is unchanged from the previous report, but is due to a similar rise in April of last year that was replaced.

CoreLogic forecasts that in May home prices will rise 0.8% and anticipates that home prices will rise 3.4% over the next year, which is likely conservative.

Black Knight reported that home prices rose 0.3% on a seasonally adjusted basis and 0.9% non-adjusted in March. Home prices are now up 5.1% year over year, down ​from 5.7%. The year-over-year number declined because of a very high comp from last year.

Bottom line – It’s important to educate your customers on the financial opportunity that still exists in home ownership.

ADP Employment Report

The May ADP Employment report showed that there were only 152,000 jobs created during the month, which was weaker than estimates of 175,000. Additionally, April ​was revised lower, from 192,000 to 188,000. ADP’s Nela Richardson said, “Job gains and pay growth are slowing going into the second half of the year.”

All the hiring took place at businesses with 50 or employees, as small businesses shed 10,000 jobs. This is something to keep in mind for the BLS Jobs Report on Friday, ​as the BLS uses imputed data via their birth/death model for small businesses and it has been coming in much hotter than ADP’s actual small business data. This could ​be a negative, meaning we could see some stronger job growth in the BLS report.

The Goods sector only added 3,000 jobs, led by Construction, which added 32,000…Manufacturing and Natural Resources/Mining were -29,000. The Service sector ​added 149,000 jobs, led by Trade/Transportation/Utilities and Education/Health Services. The previous leader, Leisure and Hospitality, only added 12,000 jobs and may ​continue to slow based on job openings in the space falling.

ADP also reported that annual pay for job stayers increased at 5%, which is unchanged from the previous reading. Job changers saw an average increase of 7.8%, ​which is a big decline from 9.3% in April.

Mortgage Applications

The MBA released their Mortgage Application data for last week, showing that purchases decreased 4% last week. Purchases are now down 16% from this time last year.

Refinances fell 7% last week and are up 5% from last year. Refinance activity made up 34% of applications, which was a big jump the previous week. Interest rates rose slightly ​from 7.05% to 7.07%, but remained pretty stable. Rates last week were about 0.25% higher than this time last year.

Since last week we have seen rates decline, which could help spark some activity.

Initial Jobless Claims

Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, rose by 9,000 last week to 229,000, which was 9,000 more than ​expected.

Continuing Claims, which measures Individuals continuing to receive benefits after their initial claims, rose 2,000 to 1.792M. This metric continues to remain around the ​highest levels since November 2021 and shows that once you are laid off it’s becoming harder to find a new job.

The Challenger Job Cut report showed that cuts were little changed, but hiring announcements fell to their lowest level in a decade.

Productivity and Unit Labor Costs

Productivity in Q1 fell to only 0.2%, which is a big decline from 3.5% in Q4. Because of this drop in productivity, unit labor costs rose from -2.8% in Q4 to 4% in Q1. While ​this was a big swing due to workers being less productive, the market was expecting 4.9%. This is not great from an inflation standpoint.

BLS Jobs Report

The Bureau of Labor Statistics (BLS) reported that there were 272,000 jobs created in May, which was much stronger than estimates of 185,000. There were negative ​revisions to the previous two months totaling 15,000.

Almost all the mobs came from the faulty Birth/Death model added 231,000 jobs to the headline figure – without it we would have only seen 41,000. This is where the BLS ​tries to figure out how many businesses came online vs offline and how many jobs that accounted for – But it really is getting small business data, which for comparison, ​ADP said there were 10,000 job losses in small businesses in April.

Leisure and Hospitality added 42,000 jobs, but 89,000 of those came from the birth/death model…without it we would have lost 47,000 jobs in this sector. For ​comparison, ADP showed only 12,000 job gains. And the JOLTS survey showed 109,000 less job openings in this area.

Average hourly earnings, which measures wage pressured inflation, rose 0.4%, which was above estimates of 0.3%. Year over year, average hourly earnings rose from an ​upwardly revised 4% to 4.1%, which was above the 3.9% expected.

Average weekly hours worked remained at 34.3. Average weekly earnings rose 0.4%, with the year over year figure decreasing from 3.9% to 3.8% year over year.

Remember, there are two surveys within the Jobs report, the Business Survey and the Household Survey. The Business Survey is where the headline job creation number ​comes from the and the Household Survey is where the unemployment rate comes from.

The Household Survey has its own job creation component, and it showed only 408,000 job losses, what a divergence from the headline. The labor force decreased by ​250,000, but since there were more job losses than those that left the labor force, the unemployment rate rose from 3.9% to 4%. Without the exodus from the labor force, ​the unemployment rate would have moved even higher to 4.1%. There are over 5 million workers that are not employed but not counted because of how the BLS calculates ​the data.

If you look at the u-6, which is a broader measure of unemployment within the BLS report and does not remove people, the unemployment rate remained at 7.4%, the ​highest u-6 reading since November 2021.

Looking deeper at the 408,000 job losses in the household survey – There were 626,000 full time job losses, with 286,000 part time job gains. Additionally, multiple job ​holders rose by fell by 16,000.