Payrolls came in well above expectations and there was a strong upward revision to last month. Whatever weakness we see here this month (which was not as weak as expected) is going to be added back in with the November data. The report supports Chair Powell’s description of a "strong" labor market which is in a "good place" to support consumer spending, the major contribution to GDP growth.
NFP surprised to the upside at +128K in October vs. +180K upwardly-revised September and +85K consensus. The net upward revisions of the last two months totaled +95K – taking some of the momentum out of Friday morning's earlier bond bullish price action. Within the details, we see the unemployment rate on an unrounded basis at 3.562% - i.e. just missing remaining unchanged at 3.5%.
Initial Jobless Claims
Initial Jobless Claims for the week of October 26th increased by +5K from a previous 213K to now 218K. Expectations for today’s release were around 215K. Continuing claims, which lag by a week, rose to 1.69mln from 1.683mln, while the four-week moving average was unchanged at 215K.
ADP Employment Report
The private sector employment increased by +125K Jobs in October. Finance jobs increased by +17K. Goods producing sector lost -13K led by manufacturing and construction which both lost 4K. The service sector saw a gain of +138K led by health/education at +41K and trade/transportation at +32K. Professional and financial services both added +18K.
S&P CoreLogic Case-Shiller National Home Price Index
National home prices grew 3.2% in the year ending in August, up slightly from 3.1% the prior month. More than half of the 20 metropolitan areas in the index reported slower home-price growth in August than in July. Prices in the nation’s ten major cities rose 1.5%, down from the 1.6% gain in July and on the index’s 20-city composite prices were 2% higher, unchanged from July’s gain. Seven of the top 20 cities reported greater price increases in the year ending August 2019 versus the year ending July 2019. House prices are rising about half the rate from last year, with more affordable cities seeing good gains but coastal cities, with more expensive bases are seeing prices struggle. Mortgage rate decline has improved affordability, but drained inventories have supported price gains in national data.
Pending Home Sales
Contracts to buy previously owned homes increased more than expected in September, suggesting that the housing market was getting a lift from lower mortgage rates though tight supply remains a constraint. The National Association of Realtors said on Tuesday its Pending Home Sales Index, based on contracts signed last month, advanced 1.5% to a reading of 108.7. Pending home contracts become sales after a month or two, and last month's increase suggested a rebound in existing home sales, which declined 2.2% in September. Pending home sales surged 3.9% in September from a year ago. A persistent shortage of homes for sale has constrained the housing market despite lower mortgage rates and a slowdown in prices. Builders continue to complain that a lack of land and labor is making it difficult to break more ground especially on homes priced below $200,000, which are most sought after.