Economy Watch: ADP Jobs Numbers Point to Hiring Weakness
The ADP unemployment numbers are out for March; Freddie Mac reports its first quarterly profit since 2009; and Finland's new government shows resistance to an E.U. bailout of Portugal.
By Dees Stribling, Contributing Editor
It’s that time of the month again: the run-up to official U.S. unemployment numbers for the previous month. As per tradition, payroll-processing specialist ADP releases its numbers on the Wednesday before the Friday official announcement by the U.S. Department of Labor, and while it’s usually taken with a grain or two of salt, investors often react to ADP’s report.
For April, ADP says that private employers hired a net of 179,000 people, down from 207,000 new hires in March. The increase, though fairly modest, was spread out; service providers hired 138,000 of the total, while manufacturers created 25,000 new positions. There was even an uptick of 9,000 jobs in the construction industry, according to ADP.
Also on Wednesday, the Institute for Supply Management reported that its non-manufacturing (service) index dropped in April to 52.8 from 57.3 in March. Though still over 50, which means expansion, the April reading is nevertheless the lowest one since last summer. The ISM manufacturing index, by contrast, is still quite strong, though down to 60.4 in April from 61.2 in March, according to the organization earlier this week.
Freddie Mac in the black
Freddie Mac reported its first quarterly profit since 2009 on Wednesday, pulling down $676 million during the first quarter of this year, and being able to pay the U.S. government–which owns about 80 percent of the GSE–a tidy $1.6 billion dividend. During every quarter in recent years when Freddie Mac has lost money, it turns to the U.S. Treasury to make up the difference, but during 2Q11 at least, the company won’t need to do that.
The first-quarter profit compared with a whopping loss for the GSE during 1Q10 of $6.7 billion. The profit was attributable to a shrinking pool of deadbeat (“nonperforming”) mortgages that Freddie Mac holds, as those loans are gradually being foreclosed or modified in some other way. Loans in Freddie Mac possession that were seriously delinquent dropped from 3.84 percent of the total to 3.63 percent, quarter-over-quarter.
But the GSE isn’t quite out of the woods, because neither is the housing market. “Continued improvements on the employment front and in early-stage delinquencies were positive signs during the quarter,” Freddie Mac CEO Charles E. Haldeman Jr. says in a statement. “But we believe large inventories of unsold homes and a high number of distressed sales will continue to put downward pressure on home prices in many neighborhoods.”
Finns to nix financial life preserver for Portugal?
Is the E.U. bailout of Portugal a done deal? Not quite. Though talk of a $115 billion bailout is in the wind (and reported by NPR on Wednesday, citing anonymous sources), not quite all the “i”s are dotted nor the “t”s crossed.
E.U. member Finland is still the wild card–and the deal needs approval of every member. The various winners in last month’s parliamentary election in Finland are busy right now forming a new government, one that might not quite be inclined to approve a bailout of Portugal or anywhere else in the European Union, due to objections by the surprisingly strong Euro-skeptic True Finn Party.
Wall Street had a down day on Wednesday after the non-official jobs report, with the Dow Jones Industrial Average losing 83.93 points, or 0.66 percent. The S&P 500 dropped 0.69 percent, and the Nasdaq declined 0.47 percent.