Fed Chairman Powell’s Jackson Hole speech managed to exceed dovish expectations last week, with the market acknowledging that the Fed tapering is imminent, although the when and for how long will the Fed taper is to be determined. Powell also laid out that the Fed will not have to have liftoff of raising rates once the taper is over of its asset purchases. When the Fed does begin to taper its asset purchases it will be interesting to see how the market responds, we expect that the Fed would need to give plenty of reassurance that they will not be raising rates to keep the treasury market from not selling off. As we head into next week, the market is still focused on the Fed, now looking at the September meeting and the path of Delta Variant.
Initial Jobless Claims
Initial Jobless Claims fell -14k to 340k for the week ending August 28th vs. the revised level of 354k (orig. 353k) in the prior week. The 4-week moving average of claims fell almost -12k to 355k. Continuing claims, which lag by a week, fell by -160k to 2.748mln from 2.908mln (orig. 2.862mln). The 4-week moving average for continuing claims dropped -58k to 2.855mln. Initial claims have now declined in five out of the last six weeks by an average of -14k per week, while continuing claims have declined in four of the last five weeks by an average of -110k per week.
Case-Shiller HPI
The Case-Shiller 20-city HPI rose the expected +1.8% MoM for June, matching May’s increase as well. Some of the cities with the largest gains were Phoenix (+3.5%), Tampa (+3.2%), Las Vegas (+3.2%), Miami (+2.8%), Dallas (+2.8%), San Francisco (+2.7%) and San Diego (+2.4%). The cities that had slower gains were Boston (+1.0%), New York (+1.0%), and Chicago (+1.3%). The FHFA monthly index rose 1.6% MoM, increasing the YoY change from +18.2% to +18.8%.
ADP Employment Report
The ADP Employment Report for August came in well below expectations at +374k private payrolls vs. market forecast of +613k. Last month’s number of +330 has been downwardly revised to now +326k. All said, we know ADP is not the greatest indicator of what come a few days later with the BLS report, given last month’s result was much better at +703k. It is worth noting that with recent Delta Variant effects and lower business/consumer confidence surveys over the past few weeks, it’s very possible that ADP vs. BLS come in with closer results. Within the ADP report for August, leisure and hospitality represented the largest gain at +201k, while construction came back up to +30k vs. a prior +3k in the month before. Professional and business services only added +19k vs. last month’s +50k, while healthcare fell from a prior +54k to now +39k. Trade/transportation/utilities also fell to lower levels, down to +18k vs. the prior +36k.
ISM Manufacturing PMI
The ISM Manufacturing PMI rose +.4 points to 59.9 in August vs. market consensus of 58.6. Overall, most sectors saw decent results across the board, given that 15 out of 18 surveyed industrials reported growth. Comments from those surveyed respondents still reflect some challenges, although most reported that demand and orders remain stronger. There is still a good number that are also reporting the continued supply constraints, especially with the microchips, while also reporting that materials and labor are still very hard to obtain.
