REFILE-LIVE MARKETS-Triple dip: ADP, Challenger, mortgage rates

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TRIPLE DIP: ADP, CHALLENGER, MORTGAGE RATES

Wednesday brought with it a smattering of second-tier economic indicators, two of which could be viewed as downbeat precursors to tomorrow's hotly anticipated employment report.

Private employers unexpectedly eliminated 33,000 jobs in June, according to payrolls processor ADP in defiance of the 95,000 adds analysts were expected and marking the first decline since January 2022.

While ADP's National Employment index USADP=ECI is not a reliable predictor of official Labor Department data, the number stands in stark contrast with the 105,000 private job gains analysts expect Friday's employment report to show.

"The ADP report increased the odds of a downside surprise in Thursday’s nonfarm payroll release," says Jeffrey Roach, chief economist at LPL Financial. "Investor jitters could be a catalyst for a drop in yields tomorrow if the jobs report is weaker than expected. I expect a weaker-than-consensus report, increasing the odds the Fed cuts three times this year."

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

A separate report from executive outplacement firm Challenger Gray & Christmas (CGC) USCHAL=ECI showed that in June, corporate America announced it would lay off 47,999 workers, or 48.8% fewer than in May and 2% fewer than June 2024.

Even so, planned layoffs in the second quarter totaled 247,256, marking a 39.4% increase from last year. It was the highest Q2 total since 2020, when mandated COVID shutdowns caused massive job cuts.

In the first half of 2025, companies have said they'd issue 744,309 pink slips, also the most since 2020. Aside from the pandemic, you'd have to go back to 2009, the nadir of the Financial Crisis, to find a more dire YTD total.

The government slashed 3,801 jobs in June, most on the Federal level. That's a monthly increase of 46.2%. So far this year, 288,628 government layoffs have been announced, or 38.8% of total job cuts. It's by far the hardest hit sector this year, largely as a result of DOGE efforts. Retail, technology and services round out the list.

"The bulk of companies cited economic conditions last month," says Andrew Challenger, labor expert at CGC.

"Retailers are one of the hardest hit business sectors by tariffs, inflation, and uncertainty," Challenger adds. "Disruptions in (the tech) industry, both from the advancement of AI and the current uncertainties around visas, has cost thousands of jobs this year."

As if to punctuate this reality, Microsoft MSFT.O announced on Wednesday it would cut as many as 9,100 employees, or 4% of its workforce, in its latest round of layoffs, according to The Seattle Times.

Taken together, ADP and Challenger Gray amount to a preview of coming attractions. The Labor Department's June employment report, due to be released on Thursday to accommodate the Independence Day holiday, is seen showing a 20.9% monthly drop in payroll adds, while the unemployment rate is expected to inch higher to 4.3% from 4.2%.

Switching to the housing market, the cost of financing home loans cooled off a bit last week, prompting an uptick in applications, according to the Mortgage Bankers Association (MBA).

The average 30-year fixed contract rate USMG=ECI shed 9 basis points to print at 6.79%, the lowest it's been since early April.

Even so potential buyers USMGPI=ECI were unmoved; applications for loans to buy moves were virtually unchanged from the previous week. But refi demand USMGR=ECI, which accounted for 40.1% of total mortgage activity, jumped by 6.5%.

“Overall uncertainty continues to hold homebuyers out of the market," writes Joel Kan, MBA’s deputy chief economist. "However, purchase activity still remains 16 percent higher than last year’s pace."

The 30-year fixed rate, having taken a roller coaster ride over the last 12 months, is now just 24 basis points cooler than it was the same week a year ago.

Over that same time frame, purchase and refi demand have grown by 15.7% and 39.6%, respectively.

(Stephen Culp)

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