LIVE MARKETS-Post-vote data dump: ADP, trade, services PMI, mortgages

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POST-VOTE DATA DUMP: ADP, TRADE, SERVICES PMI, MORTGAGES

With markets all a-buzz over some kind of election that happened on Tuesday, investors barely seemed to notice the parade of economic data marching by.

Starting with the labor market, the private sector added an anemic 86,000 jobs in October, a carbon copy of September's downwardly adjusted reading, and 24.6% more than economists projected, according to payrolls processor ADP USADP=ECI.

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 22,000 stronger than the private payrolls increase expected from the Labor Department's more comprehensive jobs report, due on Friday.

Following Tuesday's JOLTS report, which showed improved labor market churn, the ADP report provides further evidence of labor market strength ahead of the October employment report. Economists polled by Reuters expect the US economy added 65,000 jobs last month, with the unemployment rate standing firm at a low 4.2%.

Carl Weinberg, chief US economist at High Frequency Economics, believes "the economy is at full employment," and asks "If the economy is already at full employment, then how can the Fed do better than that?"

"Just keep in mind that when the BLS reports non-farm payrolls, the figure will almost surely differ significantly from this one," Weinberg adds. "And that difference could shift market expectations either way."

The graphic below tracks ADP's National Employment Index and measures its accuracy (or lack thereof) relative to Labor Department data.

Turning to trade, the difference in the value of goods and services imported into the US and those exported USTBAL=ECI barely changed in September, narrowing by a negligible 0.7% to an even $105.0 billion, according to the Commerce Department, or $3.0 billion less than analysts expected.

Under the hood, exports accelerated to 1.9%, while imports—a GDP detractor—increased by 1.2% to an all-time high.

Year-on-year, exports have increased 10.0% compared with the 21.3% surge in imports.

With respect to capital goods, exports and imports grew by 5.1% and 7.9%, respectively.

"Imported goods needed to fuel the AI buildout are still a key driver of trade flows, not to mention preventing a narrower deficit,” writes Oren Klachkin, financial markets economist at Nationwide. “After putting aside inflation impacts, the rest of imports generally point to healthy domestic demand."

The closely watched goods trade deficit with China widened by 18.8% to $21.9 billion.

Net trade has detracted from headline GDP for 10 of the last 12 quarters.

Pivoting to the services sector, the Institute for Supply Management's (ISM) non-manufacturing PMI USNPMI=ECI dropped 0.4 points in October to print at 54.5, landing 0.3 points south of consensus, but remaining comfortably north of 50, the magic PMI level dividing expansion from contraction.

A closer gander at the index's subcomponents shows new orders and production decelerated but remained in expansion, dipping by 3.9 points and 2.7 points, respectively. Employment rose 1.3 points to 51.4, venturing further into expansion. Imports picked up and export orders leap-frogged back into expansion, while inventories lost some steam.

Prices paid—an inflation predictor—eased one full point to an even 73.0, easing back from their highest reading in over four years. This component has now been north of 60 since December, the longest stretch since COVID shutdowns strangled the supply chain.

"Tariffs and fuel cost impacts continued to be the most-cited issues impacting respondents’ supply chains, while many respondents indicated they are not yet seeing the full impact of these cost escalations or have not passed them through to customers," writes Steve Miller, chair of ISM's Services Business Survey Committee. "This indicates that more pricing pressure is on the way if oil and tariff cost impacts are not mitigated, even if they do not increase from current levels."

Remarks from survey participants are littered with mentions of war-related price pressures (particularly regarding fuel), tariffs, supply chain challenges and rising interest rates, counterbalanced against solid demand.

Finally, in the housing market, the cost of financing home loans cooled down a tad last week, but not by enough to inspire an uptick in mortgage demand, according to the Mortgage Bankers Association (MBA).

The average 30-year fixed contract rate USMG=ECI — which tends to rise and fall in tandem with benchmark Treasury yields — shed 7 basis points to 7.30%.

But that's still north of 7%, so demand for loans to purchase homes USMGPI=ECI — among the housing market's most forward-looking indicators — fell 2.2%. But refi applications USMGR=ECI, representing 39.8% of the mortgage pie, eked out a negligible 0.1% increase.

Taken together, mortgage demand weakened by 1.2%.

"Mortgage rates drifted down to their lowest level since September 2026 last week in the wake of the Federal Reserve’s decision to hold on additional rate hikes at its October meeting,” says Mike Fratantoni, chief economist at MBA.

The 30-year fixed rate is currently nearly one full percentage point hotter than it was during the same week a year ago.

Over that same period, purchase applications have dipped 19.5%, while refi demand plunged 59.9%.

(Stephen Culp)

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