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DATA JAM: ADP, CHALLENGER GRAY, PMI, ET AL.

This week's economic reports, due to the July 4 holiday, are obliged to merge lanes, resulting in data bottlenecks. There's nothing to do but dive in.

Starting with the labor market, the private sector added 98,000 jobs in June, a 19.7% drop from May and 20,000 fewer 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. Regardless, the ADP print is 10.9% weaker than the 110,000 private payrolls increase expected from the Labor Department's more comprehensive jobs report, due on Friday.

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

On the firing side of the labor market coin, outplacement firm Challenger, Gray & Christmas (CGC) USCHAL=ECI reports that U.S. firms announced 45,849 layoffs in June.

That marks a monthly drop of 52.7% and is 4% fewer than a year ago.

There have been a total of 443,604 layoffs announced so far in 2026, down 40% from last year's January-to-June period, which was inflated due to DOGE firings.

In the second quarter, employers said they'd hand out 226,242 pink slips, up 4% from Q1 but down 9% from Q2 2025.

"The pace of layoffs cooled considerably in June, similar to plans last June, and as is typical for summer months," said Andy Challenger, CGC's workplace expert. "That said, the cuts we are seeing remain concentrated in technology, and artificial intelligence continues to reshape how companies think about headcount.”

For the fourth straight month, artificial intelligence was the top reason provided, responsible for 14,029 pink slips, or 30.6% of the total. So far this year, AI can be blamed for 101,743 job cuts, more than one in five.

ADP and Challenger are the opening acts for the June employment report due tomorrow, which is expected to show the U.S. economy added 110,000 jobs last month, with the unemployment rate standing pat at 4.3%.

The Institute for Supply Management's (ISM) Purchasing Managers' Index (PMI) USPMI=ECI showed factory activity decelerated by 0.7 points in June to 53.3, weaker than the even 54.0 analysts expected.

ISM's manufacturing PMI has now enjoyed six consecutive months north of the magic PMI level of 50, the dividing line between monthly contraction and expansion.

Wandering into the weeds, new orders and production lost some momentum, inventories moved from contraction into expansion, and while the employment metric improved, it remained in contraction. New export orders moved into contraction.

The prices-paid element — an inflation predictor — dropped 9.1 points to a still slightly elevated reading of 73.0. That was the largest monthly drop in four years, in the aftermath of Covid-related supply bottlenecks.

"The rush of activity aimed at getting ahead of supply-chain disruptions linked to the conflict in the Middle East showed signs of fading in June," writes Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. "But the big picture is that the manufacturing sector still seems to be in relatively good health."

Commentary from ISM's survey participants continues to be dominated by uncertainties and supply headwinds related to Middle East turmoil, tariffs, and inflation.

But S&P Global also had its say, with its final take on June manufacturing PMI USMPMF=ECI, which printed at 53.9, not quite as robust as its initial "flash" reading of 55.7, and marking a 1.2-point deceleration from May's final take.

"Supply chain delays and upward price pressures continued to be widely reported, albeit moderating thanks to recent news of an improving situation in the Middle East," says Chris Williamson, chief business economist at S&P Global Market Intelligence. "However, despite the recent drop in energy prices and brighter outlook for shipping, business confidence has fallen sharply, in part reflecting concerns that an end to war-related inventory building could start to act as a drag on sales."

The S&P Global and ISM indexes differ in the weights they apply to the various components (new orders, employment, etc).

Here's how closely they agree (or not). The dueling PMIs are set to meet again on Monday, when they spar over the services side of the coin.

Separately, expenditures on construction projects USTCNS=ECI increased by 0.1% in May, hitting the consensus bull's eye.

A peek beneath the hood of the Commerce Department's report reveals private sector outlays were unchanged while government spending increased 0.5%. Compared with last year, however, private construction spending is down 2.1%, while publicly funded construction spending was up 0.3%.

Spending on residential projects — the erstwhile tentpole of construction spending — increased by 0.3%, and is now up 1.8% year-on-year.

This seemingly contradicts recent housing market data, including single-family housing starts dropping in May to an eight-month low, and the deepening pessimism among homebuilders (NAHB).

Finally, in the housing market the cost of financing home loans cooled down a bit last week. But mortgage demand, on aggregate, didn't budge, according to the Mortgage Bankers Association (MBA).

The average 30-year fixed contract rate USMG=ECI shed 2 measly basis points to 6.57%.

That was enough to prompt a 0.5% increase in demand for loans to purchase homes USMGPI=ECI, but refi applications USMGR=ECI slipped 0.7%.

Taken together, total mortgage demand was unchanged from last week.

The 30-year fixed rate currently sits 22 basis points below where it was during the same week a year ago.

Over that same period, purchase applications have increased by 3.2%, while refi demand has risen by 9.1%.

(Stephen Culp)

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