Brighter Jobs Picture to Tip Fed Taper?
Recapping the day's news and newsmakers through the lens of CNBC.
Pretty good news for the economy (and maybe bad news for taper-obsessed traders): Hiring is up and jobless claims have stabilized.
Private companies hired 188,000 workers in June, far better than expected, and 343,000 people made initial claims for jobless benefits, below an estimated 350,000.
Service jobs led the way with 161,000. Trade, transportation and utilities added 43,000 jobs; professional/business services added 40,000 jobs; construction 21,000 jobs; financial activities 13,000; and manufacturing added 1,000 jobs. Small business added 84,000 jobs, midsize companies gained 55,000 and large ones added 49,000. Economists say 150,000 monthly jobs are needed to stay even with new entrants into the labor force.
With the release of these ADP numbers, the prediction for Friday's payroll number is now 175,000, which would suggest slowly falling unemployment.
All along the Fed has tied taper timing to the jobs market. If these unspectacular but stable numbers continue, the Fed's unemployment taper target could be at hand in the next year or two.
"I think the big news here is that you had job growth across all industry sizes."
—CNBC's Steve Liesman
"175,000, which we have been getting over the past two months means the unemployment rate has come down more than a percentage point. If nothing else changed, that would suggest that this pace of growth a year from now the unemployment rate will be about 7 percent. And then two years from now roughly 6.5 percent. Of course those are pretty key thresholds for monetary policy and consistent with the Federal Reserve estimate when they are going to raise interest rates."
—Mark Zandi of Moody's Analytics
President Barack Obama's plan to implement a key provision of the Affordable Care Act health-care coverage has had a setback. The administration announced a one-year delay to the mandate that large employers provide coverage to their workers or face a penalty. It appears that the health care market and the administration weren't quite ready for the huge change.
The largest employers will now have until 2015 to provide coverage, which is considered a victory by the program's opponents. The victory will be short-lived, however; no other provisions of the law were changed. That hasn't kept employer groups from crowing, though.
Others have spun the delay as not that big a deal because the companies the delay applies to by and large already offer health coverage. The decoupling of health care and employment is well underway, some said.
"This applies to a very small number of employers. Those employing under 50 workers never had a penalty because they didn't provide health insurance and that's the vast majority of employers in this country—about 95 to 96 percent of all employers. It really applies to the 200,000 employers who...have more than 50 workers and 94% of those employers already offer health insurance. This applies to about 6 percent of the largest companies in the country, mostly retailers and restaurant companies. For them it is a good breather."
—Ezekiel Emanuel, University of Pennsylvania vice provost
"This is not going to happen in the big employer market for a while, because most big employers have health insurance because it gives them an advantage in getting the kind of employees they want. This will happen in the marginal companies. We are, I believe, going to migrate away from an employer-based health care system, and I think this is a good thing."
—Howard Dean, former Vermont governor and presidential candidate
Remember those solid jobs numbers you read about above? You might want to take them with a grain of salt, as the pace of growth in the U.S. services sector slowed last month to a three-year low on slowing new orders. The number came in at 52.2, down from the 54 investors expected and the 53.7 in May. The reading isn't entirely bad; the employment component of the index showed some expansion and any number over 50 connotes growth. Whether that is treated as good news by the market in the context of a delayed taper ahead of Friday's nonfarm payroll reading remains to be seen.
"The last time we were at these levels, 52.2, it looks to me I'm going back quite a ways to February 2010 to find a lower read. If you want to keep it simple, disappointing but still above 50."
—CNBC's Rick Santelli
"This market seems to be stuck between expectations of faster economic activity in the second half and and the threat of the Fed on the other. But in the short run, we are not getting stronger news except for maybe out of the labor market in the near term, so this market is stuck in a trading range until there is a clearer picture."
— David Joy, chief market strategist at Ameriprise Financial
Applications for mortgage refinancing fell 16 percent from a week ago to the lowest level since July 2011, which isn't the best sign for the housing market. Refis account for 64 percent of all mortgage applications, down from 80 percent when rates were at their lowest.
"As rates go up, mortgage applications go down. It's a simple as that."
—CNBC's Diana Olick
—By Doug Cubberley, Special to CNBC.com