ADP National Employment Report: April 2011

Today, private staffing and business services firm ADP released the latest installment of their National Employment Report indicating that the situation for private employment in the U.S. continued to improve in April as private employers added 179,000 jobs in the month bringing the total employment level 1.35% above the level seen in April 2010.

Looking at the chart (click for full-screen dynamic version) showing ADP’s total private nonfarm payrolls since 2001 as well as the year-over-year and month-to-month percent change, you can see that while the job recovery had been anemic throughout most of 2010, more recently the trend has been picking up momentum.

Although the level of jobs is still far below the peak seen in late 2007 and still near the lows seen during the worst period of the "dot-com" recession, the bottom looks to be clearly defined and the trend is looking comparable to past recoveries.

Perusing the rest of the data in the ADP dataset you can see the the economy is currently showing the most growth for small to mid-sized service providing jobs with goods-producing jobs remaining near trough levels.

Look for Friday’s BLS Employment Situation Report to likely show somewhat similar trends.

Reading Rates: MBA Application Survey – May 04 2011

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage declined 4 basis points to 4.76% since last week while the purchase application volume increased 0.3% and the refinance application volume increased 6.0% over the same period.

While rates have generally trending up for the last six months, it will take some time to determine if this trend will continue or if rates will begin to slide back down to the historically low levels seen in mid-2010.

Keep in mind that the Feds QE2 announcement marked the start of the latest uptrend in rates so that as we near the completion of the Feds latest action (scheduled to end in June) it will be interesting to see if there is a correlated impact on rates.

Further, there has been some chatter of either a premature end to QE2 as the Fed gears up to deal with untethered inflationary forces as well as some speculation to the contrary indicating that the Fed may need to engage in QE3 later this year should the recovery stall similarly to 2010.

Both outcomes could notably impact mortgage rates and in turn, seriously impact the trends in the nation's housing markets.

In any event, the purchase application volume remains near the lowest level seen in well over a decade while refinance activity continues to slow.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

Outstanding Contraction!: Commercial Paper Outstanding April 2011

The Commercial Paper (CP) market is essentially a private debt market used by corporations as a generally cheaper means of funding typical recurring operations than drawing on a line of bank credit.

Commercial paper, as financial instrument, is by no means a recent innovation and, in fact, you can read about how the CP market was affected by the many historic financial shocks experienced by the U.S. (read Panic on Wall Street: A History of America’s Financial Disasters)

Although the Federal Reserve was able to artificially bring CP rates down significantly since the shocking 615 basis point spread blowout (A2/P2 spread) of late 2008, they have apparently not been successful in preventing an overall contraction in the CP market.

The Federal Reserve calculates and published the total amount of CP outstanding every week and for April commercial paper outstanding continued to rise slightly climbing from a series low (data tracked back as far as 2001) set back January while expanding a slight 2.11% on a year-over-year basis to $1098.40 billion, a level that is still notably lower than even the worst periods of the last two recessions.