Market 12/06: Recession signals via ADP employment report

ADP employment report: hiring slows, manufacturing sector cuts jobs

According to the ADP employment report, the labor market only added +103,000 jobs in November, lower than the expected +130,000.

• Jobs in sector manufacturing recorded the strongest decline (-15,000) followed by the entertainment hotel sector (-7000).

• Jobs in sector services and entertainment after a long period of growth also declined for the first time since February 2021.

Wage growth rate also slowing — with the slowest increase since 2021:

• Workers continuing old jobs increase +5.6% YoY.

• Workers changing jobs increase +8.3% YoY.

• Labor productivity Q3: +5.2% QoQ.

  

• Labor costs: -1.2 QoQ.

→ Labor productivity increases while labor costs do not increase correspondingly may reduce inflationary pressure due to more stable prices.

10-year bond yield recorded decline around 4.15% after ADP report.

• Market attention turning to non-farm payrolls report on Friday.

  • Expected job growth to stall (growth ~0%) in 2024.

    → Signs of cooling labor market.

Mortgage rates lowest in 4 months: boosting refinancing demand

• Mortgage rates drop to 7.17% - lowest in nearly 4 months.

• This decline has boosted refinancing demand to nearly 14%, highest since February.

Trade deficit highest in 3 months due to export decline

Trade deficit increases +5.1% to 64.3 billion USD in October:

• Exports: 258.8 billion USD, down 2.6 billion USD MoM.

• Imports: 323 billion USD, up only 0.5 billion USD MoM.

Some other news:

• Google expected to launch AI model considered their “most superior” - Gemini in 2024.

• PayPal stock falls after BofA downgrades previously “overly optimistic” forecasts for the company for 2024.

• Moody's continues to downgrade ratings of 8 Chinese banks to negative after the country was downgraded in credit rating.

  • Chinese bonds have also been downgraded due to concerns about public debt.

• McDonald expects to expand by about 10,000 new stores by 2027 and double sales from its loyalty program.

• British American Tobacco shares fall to 10-year low:

  • … after the producer of Dunhill and Lucky Strike warned of a -31.5 billion USD loss from the company's US brands.