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Real Time Insight

We scored a big miss on the jobs scorecard this morn.
For October, the ADP Payroll Company recorded their lowest job add number since May 2013.  Private sector employment increased +130K. Further along this downbeat path, their economists revised September’s job gain down from +166K to +145K.
By company size, small businesses added +37K jobs; medium businesses +35K jobs; large businesses +81K jobs.  What's explains the drop?  The bump up in mortgage rates and the Federal shutdown combined to hit the growth of small business hiring.

Big weak spots? -- Professional Services and Financial Activities. Over the last few months, Services contributed +146,000 jobs.  October added +107,000 Services jobs.

  • Professional and Business Services added only +20,000 jobs in October.  It averaged +37K jobs each month in 2013.  That’s a cut in almost half. 
  • Financial Activities was down -5,000 jobs.  It averaged +4K adds a month in 2013.  That’s a big reversal.
  • Home construction has lots of small companies that depend on it.   You might think it was hit.  October jobs in this sub-sector were +14K.  The monthly average this year was +13K. Building needs to be financed first. It is likely the hit here is coming.

Add back +20K Professional Business Service Jobs and +10K Financial Activities and you get a +160K ‘Muddle Through’ number.
I wager summer taper anxiety was the major factor.  It drove the 10-year U.S. Treasury rate to 3%. That took the 30-year fixed mortgage rate over 4.5%.
What do you think?

My RTI Question:  What Caused This Weak Jobs Number?


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