The Morning After

The stock market is up nicely this morning after yesterday’s raucous debate. I don’t know if it’s a sign of where we are, but shares of Smith & Wesson were up as much as 2.3% today.

Some econ news this morning.

ADP’s payroll report said that 749,000 new private sector jobs were created last month. Wall Street had been expecting a gain of 600,000.

The government releases its stats on Friday, The ADP report isn’t a terribly good indicator of what the government will say, but it’s been especially bad lately.

However, during the coronavirus pandemic, ADP’s initial estimate has often trailed the official government count by a significant margin, indicating potential upside for the September count. The initial ADP estimate for August was just 428,000 but was revised upward to 481,000, still a good distance from the Labor Department tally.

For September, ADP found that manufacturing added 130,000 jobs. The only sector to grow more was trade, transportation and utilities, which grew by 186,000.

Leisure and hospitality, a sector especially hard hit during the pandemic, saw a gain of 92,000. Education and health services rose 90,000, though all the growth came on the health-care side as education lost 11,000.

Also this morning, the second-quarter GDP figure was revised upward to -31.4%. That’s an annualized number. It’s odd that a number like that is an upward revision but the previous report was for -31.7%. Bear in mind that Q2 began six months ago and ended three months ago. At the end of October, we’ll get the first report on Q3 GDP growth.

The Atlanta Fed’s GDPNow estimates Q3 GDP growth of 32%. Unfortunately, a 32% drop and a 32% gain doesn’t bring you back to even.

The pending home sales report jumped 8.8% last month to reach an all-time high. The data goes back about 20 years. It’s no secret what the cause is—very low mortgage rates. Sales were up 24% over August last year.

Buyers are running out of homes to buy. That’s putting the squeeze on inventory.

Prices are mostly being fueled by an incredibly short supply of homes for sale. The inventory of homes for sale at the end of August was down 18.6% annually, putting the market at a 3.0 month-supply.

“The increase in contract signings is shrinking the limited number of homes for sale to some of the lowest levels in recent history,” said George Ratiu, senior economist at realtor.com. “This is causing a massive imbalance to the market’s supply and demand, which is rewarding sellers with home price increases that more than double the pace of wages. Looking forward, with no signs of these dynamics shifting anytime soon, more price increases are likely on the way and affordability will likely continue to be a challenge for many buyers.”

Posted by on September 30th, 2020 at 11:07 am


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