Live Markets-Three's company: ADP, factory orders, mortgage demand

- US indexes turn green, Dow out front - Materials lead S&P 500 sectors, Real estate lags most - STOXX falls ~0.3% - Dollar edges down; U.S. crude up slightly; gold up ~1%, bitcoin dips - US 10-year Treasury yields rises to ~4.80% Economic data arrived in triplicate on Wednesday, offering insights into the labor market, manufacturing, and housing. Starting with the labor market, the private sector added anemic 38,000 jobs in August, a monthly drop of 17.4% and 10,000 fewer than economists projected, according to payrolls processor ADP. ADP has a sketchy track record as a predictor of official government data, but then so do analysts, at times. At any rate, the ADP print is 15.6% weaker than the 45,000 private payrolls increase expected from the Labor Department's more comprehensive jobs report, due on Friday. "The acceleration in payroll gains in the first half of the year looks to have cooled, settling into a more tepid pattern associated with the no hire, no fire labor market," writes Matthew Martin, senior U.S. economist at Oxford Economics. "The number remains close in line with our estimate of the breakeven pace of monthly employment growth," Martin adds. "Reduced immigration and the ageing of the native-born population have markedly slowed labor supply growth, meaning the labor market does not need to add as many jobs as in prior years to keep the unemployment rate stable." Following Tuesday's tepid JOLTS report, which showed a marked slowdown in labor market churn, the ADP report adds a further hint of labor market softness ahead of Friday's jobs report. Economists polled by Reuters expect the U.S. economy added an unspectacular 56,000 jobs last month, with the unemployment rate standing firm at a low 4.1%. The graphic below tracks ADP's National Employment Index and measures its accuracy (or lack thereof) relative to Labor Department data. Finally, in the housing market, financing home loans grew a tad costlier last week. Even so, mortgage demand managed to tick higher, according to the Mortgage Bankers Association (MBA). The average 30-year fixed contract rate —which tends to rise and fall in tandem with benchmark Treasury yields—inched exactly one basis point higher, to 6.79%. Despite the nominal increase, demand for loans to purchase homes —among the housing market's most forward-looking indicators—rose by 2.2%. Those looking to refinance existing mortgages, representing 41.8% of the mortgage pie, were less impressed. Refi applications dipped by 1.1%. Taken together, mortgage demand strengthened by 0.8%. "Mortgage rates reached their highest levels in four weeks as investors’ concerns about inflation and growing deficits push yields higher across the globe," says Mike Fratantoni, chief economist at MBA. The 30-year fixed rate is currently 15 basis points hotter than it was during the same week a year ago. Over that same period, purchase applications have dipped 0.6%, while refi demand slid 18.8%. Jumping over to manufacturing, new orders for U.S. factory-made merchandise beat expectations in July, rising 0.9% in a bounce-back from June's 0.2% decrease. Estimates called for a weaker 0.6% increase. As is often the case, planes provided the lift. Digging below the surface, a 12.7% rise in orders for commercial aircraft was responsible for much of the upside. Excluding transportation, new orders would have risen at a more sedate 0.6%. On the other hand, a 1.5% drop in defense-related capital goods and a 1.1% decline in computers/electronics held the headline number in check. Unfortunately, new orders for core capital goods—which exclude aircraft and defense items and are seen as a barometer for corporate spending plans—were downwardly revised from 0.2% to zero, unchanged from June. Even so, new factory orders appear to have broken free from the $600 billion zone, where they have languished since mid-2022, a move which corresponds nicely with the ISM manufacturing PMI's return to expansion territory, now in its eighth month.

Live Markets-Three's company: ADP, factory orders, mortgage demand

Market snapshot

ADP signals softer labor market

Mortgage demand edges higher despite rising rates

Factory orders rebound, but core capital goods weaken

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