Market Matters

The Fed raised rates 75 bps on Wednesday, in a move that was widely expected. The biggest thing we learned from the press conference with Chair Powell is that the Fed is looking to make smaller rate hikes but may raise the overall Fed Funds rate to a higher overall level than what they were expecting a few months ago. With the Fed Funds rate at 3.75%-4%, we are now at a restrictive monetary policy from the Fed, which should slow the economy and fight inflation. Powell still sounded very hawkish, but the Fed is indicating that they are slowing their pace of rate hikes, which is a good step.

 

Initial Jobless Claims

Initial Claims arrived almost as expected and virtually unchanged from last week at 217k (mkt +220k); last week's figure was revised to 218k from 217k. Continued claims came in at 1.485 million, higher than market expectations of 1.450 million. Jobless claims are a statistic that is reported weekly by the US Department of Labor that counts people filing to receive unemployment insurance benefits. If we see jobless claims increasing, that is not a good sign for the economy because few people have jobs, and vice versa if we see claims falling. This is a pretty strong report, so the labor market still looks strong.

 

JOLTS

JOLTS job openings and labor turnover survey for September came in hot, at 10.717 million jobs, which is a strong beat of the market expectations of 9.750 million, and up from the prior months 10.280 million. About 4.1 million Americans quit their jobs in September, which is a slight decline from the month prior. New hires dropped to about 6.1 million from 6.3 million, which suggests that businesses are having trouble filling open positions. The JOLTS survey is a monthly report by the Bureau of Labor Statistics (BLS) that counts job vacancies and separations, including the number of workers voluntarily quitting employment. The Fed is hoping to see the number of job openings fall, which will take some pressure off a tight labor market. A tight labor market does not help bring down the inflationary pressure that the US economy is experiencing.

 

ADP Employment Report

ADP employment report for October came in hot, up 239k versus market expectations of 185k and September's 192k. The ADP Employment Report is a monthly report of economic data that tracks the level of nonfarm private employment in the US. This report is a useful preview of the BLS Nonfarm payrolls report. October payrolls increased 210,000 in leisure/hospitality, 84,000 in trade/transportation/ and utilities, and 11,000 jobs in natural resources/mining. We saw job losses of 10,000 in financial activities, 14,000 in professional/business services, 17,000 in IT, and 20,000 in manufacturing. This is still a strong number, which may mean we see a strong nonfarm payrolls number on Friday.

 

ISM Manufacturing Index

ISM Manufacturing Index came in at 50.2, which is close to market expectations of 50.0, and the prior month's 50.9. The Prices Paid index fell to 46.6. which is down from last month's 51.7, New Orders index came in at 49.2, which is up from last month's 47.1, and the employment index came in at 50.0, up from the prior month's 48.7. The ISM manufacturing index is a monthly indicator of the US economic activity base on a survey of purchasing managers at more than 300 manufacturing firms and is considered a key economic indicatory in the US economy. A reading of 50 means that there is no change in the manufacturing segment of the economy.