Macro Monkey Says
Pot, Meet Kettle
When I was sitting/sleeping through classes like Monetary Econ or some other BS back in the day, never once did it cross my mind that I’d be writing about slower job growth and weakening demand for housing in a positive light. But hey, crazier things have happened.
Still, it’s a little weird right now. Without any actual catalysts occurring all the way until tomorrow, markets at this stage are experiencing a similar feeling to when you and your friends are coming off your high: no one’s really saying much, no one’s laughing or crying; nothing’s happening.
But yesterday, two early yet key indicators of broader macro forces printed bad but good reports. Let’s take a look.
First, we gotta talk about the ear-to-ear grin put on JPow’s face in response to Wednesday’s ADP Employment change report. Broadly considered a worse indicator than the actual job numbers out of the Labor Department set to drop tomorrow, the ADP report does come out just a tad sooner, so let’s all bet our lives on it.
According to ADP data, private payrolls expanded by 145k over the course of March, about 30% below consensus guesstimates for 210k and a monstrous dropoff from the revised addition of 261k in February.
A slowdown was priced in, but a slowdown this hardcore was just outright surprising. Still, markets didn’t have all too much to say in the immediate aftermath.
At the same time, the Mortgage Bankers Association, unfortunately, abbreviated as MBA, reported a likable decline in average 30-year fixed mortgage rates across the US. Average rates declined to 6.4% from 6.45% in the preceding week (yes, week) as the home purchase index from MBA saw a respectable decline as well.
Despite jobs and mortgages seeming to sit on opposite sides of the table, from a macro-synthesis point of view, they mean essentially the same thing. Pot, I’d like you to meet my friend, kettle.
JPow has been crossing his fingers and holding his breath for over a year now in hopes of watching home and labor demand decline soon rather than later. In 2023, it’s finally what he’s getting, largely, especially according to data this week, as discussed over the past two days.
Now, of course, basing a macro theory off a single-digit number of data points probably isn’t the smartest move, but we like to keep it simple (stupid) here at the Peel, and unlike people, numbers never lie.
Wage-push inflation has been the primary culprit of the past year’s debilitating uptick in prices of *checks grocery list* everything. Dissimilar to producing goods, effecting services for clients carries a primary and, at times, effectively singular cost: people. So, when S&P reported in tandem with the two previously discussed reports that readings from prices to new orders for non-manufacturing PMI (aka services) had come in below expectations and largely declined from preceding months, this was almost certainly welcome news at the FOMC.
And, by historical and, frankly, rational terms, that is just ludicrous. Economic slowdowns are shockingly usually not the best news to go around, but in an economy like this, we’ll do anything to finally beat the last sh*t out of inflation.
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