President Obama's reelection odds at internet betting site www.intrade.com have increased since labor day - reaching a high of almost 80% before dropping back to 70/71% in trading today.  Pre debate, the odds seem to favor the president.  I still think the election is too close to call with a pretty tepid economic recovery making the outcome pretty much a 50/50 affair.

Kevin Spires, CFA, FRM

Over in the ChartRoom, our Monthly US Housing Chart Package is now updated. 

One very important data point from the Housing Chart Package is the strong recovery in Home Builders Sentiment.  Released earlier this month, the NAHB/Wells Fargo Housing Market Indicator (HMI) has increased from 16 one year ago to 40 today.  The HMI leads single family housing starts by 3-5 months, so expect a rapid exceleration in Housing Starts over the next few months - after total housing starts have already been running at 20%+ Y/Y growth rates already.

One reason that Homebuilders have been feeling better is that Home Prices have stopped declining.  It is tough to build a spec house and have the price drop 5% over the time you are building the house - putting tremendous pressure on profit margins.

Now that 6 years have passed since the bubble burst, expect home construction to grow at double digit rates for the foreseeable future - turning that massive headwind into an economic tailwind.

Kevin Spires, CFA, FRM

The Institute for Supply Management (ISM) releases a survey of Manufacturers and a survey of Non-Manufacturers each month.  Widely followed, the ISM moves markets when the results are better or worse than expected.

The Employment subcomponents of the two ISM surveys are a good predictor of the current employment picture across the whole economy.  In particular, an average of the two surveys, weighted 80% towards the Non-Manufacturing Survey and 20% towards the Manufacturing Survey is an excellent predictor of current employment growth.

Given the current level of this indicator, I would expect about .20% Quarterly employment growth which equals about 75k -100k payroll jobs growth a month.
The ISM Employment sub-components are showing tepid growth in jobs - which has lined up fairly well with actual employment growth the past few months.

Kevin Spires, CFA, FRM

The ADP Employment report showed a gain of 162k Private Sector Jobs in September versus a revised gain of 189k in August.

While many public commentators have been trying to dismiss the strength in the ADP report by saying it has overestimated the Jobs Report payroll number by 60k+ the past few months, the ADP report, in my opinion is a better count of payrolls than the first estimate released by the government.

As we learned last week, the initial government count is an estimate that is based off of a survey of thousands of individual businesses.  (Full disclosure: my wife's small business is a survey respondent)  Each individual business inputs there payroll numbers each month and the government then estimates the economy wide payroll totals.    At the end of each year, the government recompiles payroll counts from the state withholding data.  For last year, the government undercounted jobs by 360k - or by 30k a month.  The government puts a confidence interval of about +/- 100k on their monthly payroll count, so the actual job count could fall in a very wide range.

ADP, on the other hand, has an actual count of checks cut through their systems which allows them to then estimate the economy wide private payroll count.  In real time, the ADP count is just better.  It is not as choppy and it still has a incredible correlation to actual payrolls into and out of recesssions.  Given the ADP count of 162k, I would expect the governmet to estimate 150k-200k total jobs added in September in this Friday's jobs report.