Former FTX CEO Sam Bankman-Fried claims he committed no fraud

Striking a contrite tone, former FTX CEO Sam Bankman-Fried said he “didn’t do a good job” at upholding his responsibilities to regulators, customers, and investors in a hotly anticipated conversation with CNBC’s Andrew Ross Sorkin at the Dealbook Summit.

Bankman-Fried’s FTX imploded in mid-November after Coindesk reported irregularities in the company’s balance sheets. The company filed for Chapter 11 bankruptcy protection in Delaware on Nov. 11.

“I didn’t ever try to commit fraud on anyone,” Bankman-Fried said. “I saw it as a thriving business and I was shocked by what happened this month.”

“I’ve had a bad month,” Bankman-Fried added later.

“We completely failed on risk,” Bankman-Fried continued. “That feels pretty embarrassing, in retrospect.”

Bankman-Fried appeared by video feed from the Bahamas, Sorkin said. “I’ve been in the Bahamas for the last year,” Bankman-Fried said when asked about why he remained in the island nation.

Sorkin asked Bankman-Fried what motivated his acquisitions in the crypto industry, given the size of Alameda’s borrowing from companies Bankman-Fried intended to acquire.

Bankman-Fried claimed that he believed that by the middle of 2022, Alameda had repaid all lines of credit to various borrowing desks. But Alameda still owes BlockFi over $670 million, according to court filings.

“What are your lawyers telling you right now? Are they suggesting it’s a good idea for you to be speaking?” Sorkin asked the former billionaire.

“No, they’re very much not.”

“The time that I really knew there was a problem was November 6,” Bankman-Fried said, after Alameda’s sizable FTT position was exposed by Coindesk. “When we looked at that, there was a potential serious problem.”

“Alameda had taken a huge hit” by that point. “We were seeing a run on the bank start,” Bankman-Fried said.

“I was nervous [when] the Alameda balance sheet” was exposed by Coindesk, Bankman-Fried said, but expected the damage was going to be limited to Alameda, not an “existential” crisis for FTX.

Sorkin asked Bankman-Fried why FTX and Bankman-Fried even had access to customer money.

“I wasn’t running Alameda, I didn’t know exactly what was going on, I didn’t know the size of their position,” Bankman-Fried said. “A lot of these are things I’ve learned over the last month [in the days leading up to bankruptcy.]”

New leadership at FTX said that Bankman-Fried exercised significant control over the entire empire.

Sorkin pressed Bankman-Fried on Alameda’s gambling on questionable cryptocurrencies, reading a letter out from an investor who lost his life savings of $2 million.

“The U.S. platform is fully solvent and funded,” Bankman-Fried claimed. “I believe withdrawals could be opened up today and be made whole.”

“Can I ask you about the drugs?” Sorkin said. “It’s funny hearing this. I have half a glass of alcohol a year,” Bankman-Fried responded.

The FTX founder repudiated claims of wild partying and off-label drug use, saying that FTX functions consisted of “board games,” or “dinner parties.”

Bankman-Fried claimed he was unaware of the Alameda exposure. In 2019, he said, 40% of FTX’s volume was from Alameda. By 2022, Bankman-Fried claimed, that number was down to 2%, which led him to believe that FTX’s exposure was lessened.

Sorkin continued to press Bankman-Fried on the lending of customer assets. Bankman-Fried demurred.

“In 2018, FTX didn’t have bank accounts,” Bankman-Fried said as justification for why users were asked to wire funds to an account in Alameda’s name instead of directly to FTX.

Bankman-Fried has engaged with the media only sporadically. “F*** regulators,” he told a Vox reporter in a Twitter message.

“I f***** up,” he wrote in another Tweet.

FTX was once hailed as the poster child of responsible crypto. Regulators and lawmakers looked to Bankman-Fried as the future of crypto regulation, a reputation that Bankman-Fried cultivated through appearances before Congress and deepened through generous political contributions.

Bankman-Fried was already known as one of the largest donors to Democratic candidates. He claimed in a recent interview that he gave equally generously to Republican causes, through so-called “dark pool” contributions.

Reporters, Bankman-Fried said, “freak the f*** out if you donate to Republicans.”

Bret Taylor steps down as Salesforce co-CEO, Marc Benioff stays as CEO

Marc Benioff, co-chief executive officer of Inc., left, and Bret Taylor, co-chief executive officer of Inc., during a keynote at the 2022 Dreamforce conference in San Francisco, California, on Tuesday, Sept. 20, 2022.

Marlena Sloss | Bloomberg | Getty Images

Salesforce said Wednesday that Bret Taylor will step down as co-CEO on Jan. 31, leaving Marc Benioff alone again at the top of the cloud software company he co-founded in 1999.

Benioff closely embraced Taylor, who joined the company in 2016, when he sold his productivity software startup Quip to Salesforce. Taylor played a key role in Salesforce’s $27.1 billion acquisition of Slack, the company’s largest transaction ever.

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Salesforce promoted Taylor, 42, exactly a year ago from the position of president and chief operating officer. Benioff described Taylor then as “a phenomenal industry leader who has been instrumental in creating incredible success for our customers and driving innovation throughout our company.”

His departure is surprise considering how rapidly he climbed the ranks and gained the trust of Benioff and the board. Two months ago, Benioff and Taylor were speaking together on stage at the company’s Dreamforce conference in San Francisco. The duo each donned rabbit ears, a reference to the rabbit mascot for the Genie service Salesforce was introducing at the time.

The announcement also calls into question Benioff’s ability to work alongside someone with an equal title. Almost three years ago, Keith Block, an ex-Oracle executive, left as co-CEO of the company. He’d held the role for just 18 months after being promoted from operating chief.

Benioff told CNBC soon after Block became co-CEO that he liked the idea of having someone share the top job so they could have a “divide and conquer strategy” and so he could spend time investing, doing philanthropy and mentoring other business leaders.

It’s been a busy year for Taylor.

He was chairman of Twitter heading into Elon Musk’s acquisition of the social media company, a deal completed last month. In an interview in September, Taylor said the deal “doesn’t come up a lot” in Salesforce customer meetings. Taylor hasn’t tweeted since Oct. 26.

“I am grateful for six fantastic years at Salesforce,” Taylor said in a statement on Wednesday. “Marc was my mentor well before I joined Salesforce and the opportunity to partner with him to lead the most important software company in the world is career-defining. After a lot of reflection, I’ve decided to return to my entrepreneurial roots. Salesforce has never been more relevant to customers, and with its best-in-class management team and the company executing on all cylinders, now is the right time for me to step away.”

Before Quip, Taylor sold FriendFeed to Facebook and helped to create Google Maps.

Taylor made $22.8 million in total compensation in fiscal 2022, mostly from stock awards, according to the company’s latest proxy filing. That’s up from $13.9 million the prior year. The median pay for a Salesforce employee in the past year was $181,612, the filing said.

As of Jan. 31, Taylor had roughly $80 million of unvested stock units. Most of that was from restricted stock he received when Salesforce purchased Quip. Those restricted shares “vest in equal quarterly installments through August 2023 subject to Mr. Taylor’s continued employment with the Company,” the proxy filing says.

Also on Wednesday, Salesforce disclosed better-than-expected fiscal third-quarter results. But the company’s stock was down as much as 6% in after-hours trading.

WATCH: Cloud stocks face double-digit losses

Cloud stocks face double-digit losses

CDC will test sewage for virus in communities outside New York

The U.S. will expand polio wastewater surveillance to communities with low vaccination rates outside the New York City metro area, after an outbreak over the summer left an unvaccinated adult paralyzed and raised questions about how widely the virus may be circulating.

The Centers for Disease Control and Prevention, in a statement Wednesday, said it will initially work with health officials in Michigan and Philadelphia to identify communities with low vaccination rates and begin testing sewage the in those areas. The CDC said it is in preliminary discussions with other state and local health departments about expanding testing to other areas of the U.S.

Federal health officials will also expand sewage surveillance for polio to counties that have possible connections to the communities in New York where the virus is known to be circulating. The CDC said the expanded surveillance program will help determine whether poliovirus is present in other parts of the U.S. and direct efforts to boost vaccination rates in communities that are risk.

The sewage testing will last at least four months once initiated. The CDC described the expanded surveillance program as strategic and limited in focus to certain at-risk communities.

The decision by federal health officials to expand polio surveillance comes after an unvaccinated adult in Rockland County, New York, was left paralyzed after contracting the virus over the summer. The CDC considers a single case of paralysis from polio a public health emergency because it’s so rare and indicates the virus is spreading throughout the community.

Public health officials subsequently confirmed the virus was in fact spreading widely after sewage samples from five other New York counties tested positive. The Rockland patient did not travel internationally, which means they almost certainly picked up the virus from someone else in the community.

The virus spreading in the New York area is related to a strain used in the oral polio vaccine. The U.S. stopped using this vaccine more than 20 years ago because it uses a live but weakened virus that in rare instances can mutate and become virulent again, posing a threat to the unvaccinated.

Other countries do still use the oral polio vaccine because it is cheap, effective, easy to administer and generally safe. The U.S. uses an inactivated polio vaccine administered as a series of shots. It uses killed virus that cannot replicate or mutate.

Although the Rockland County patient is believed to have caught polio through local spread, the chain of transmission likely originated abroad from someone who received the oral vaccine.

The CDC said the risk to the general public is low because more than 92% of Americans are vaccinated against polio. The vaccine is very effective at preventing severe disease and paralysis, though it does not stop transmission of the virus.

The oral vaccine is very effective at blocking transmission and is typically used to crush outbreaks. The CDC is holding discussions on possibly introducing a newer version of the oral vaccine, which is more stable and carries less a risk of mutation, to address rare outbreaks such as the one in New York.

Fed Chair Jerome Powell says smaller rate hikes could come in December

Fed Chair Jerome Powell on the status of inflation

WASHINGTON – Federal Reserve Chairman Jerome Powell confirmed Wednesday that smaller interest rate increases are likely ahead even as he sees progress in the fight against inflation as largely inadequate.

Echoing recent statements from other central bank officials and comments at the November Fed meeting, Powell said he sees the central bank in position to reduce the size of rate hikes as soon as next month.

But he cautioned that monetary policy is likely to stay restrictive for some time until real signs of progress emerge on inflation.

“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said in remarks delivered at the Brookings Institution.

The chairman noted that policy moves such as interest rate increases and the reduction of the Fed’s bond holdings generally take time to make their way through the system.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” he added. “The time for moderating the pace of rate increases may come as soon as the December meeting.”

Powell: There's a long way to go to restore price stability

Markets already had been pricing in about a 65% chance that the Fed would step down its interest rate increases to half of a percentage point in December, following four successive 0.75-point moves, according to CME Group data. That pace of rate hikes is the most aggressive since the early 1980s.

What remains to be seen is where the Fed goes from there. With markets pricing in the likelihood of rate cuts later in 2023, Powell instead warned that restrictive policy will stay in place until inflation shows more consistent signs of receding.

“Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level,” Powell said.

“It is likely that restoring price stability will require holding policy at a restrictive level for some time. History cautions strongly against prematurely loosening policy,” he added. “We will stay the course until the job is done.”

Powell’s remarks come with some halting signs that inflation is ebbing and the ultra-tight labor market is loosening.

Earlier this month, the consumer price index indicated inflation rising but by less than what economists had estimated. Separate reports Wednesday showed private payroll growth far lower than expected in November while job openings also declined.

Jerome Powell on wages, unemployment and inflation

However, Powell said short-term data can be deceptive and he needs to see more consistent evidence.

For instance, he said Fed economists expect that the central bank’s preferred core personal consumption expenditures price index in October, to be released Thursday, will show inflation running at a 5% annual pace. That would be down from 5.1% in September but still well ahead of the Fed’s 2% long-run target.

“It will take substantially more evidence to give comfort that inflation is actually declining,” Powell said. “By any standard, inflation remains much too high.”

“I will simply say that we have more ground to cover,” he added.

Powell added that he expects the ultimate peak for rates – the “terminal rate” – will be “somewhat higher than thought” when the rate-setting Federal Open Market Committee members made their last projections in September. Committee members at the time said they expected the terminal rate to hit 4.6%; markets now see it in the 5%-5.25% range, according to CME Group data.

Supply chain issues at the core of the inflation burst have eased, Powell said, while growth broadly as slowed to below trend, even with a 2.9% annualized gain in third-quarter GDP. He expects housing inflation to rise into next year but then likely fall.

However, he said the labor market has shown “only tentative signs of rebalancing” after job openings had outnumbered available workers by a 2 to 1 margin. That gap has closed to 1.7 to 1 but remains well above historical norms.

The tight labor market has resulted in a big boost in worker wages that nonetheless have failed to keep up with inflation.

“To be clear, strong wage growth is a good thing. But for wage growth to be sustainable, it needs to be consistent with 2% inflation,” he said.

Powell spoke at length about the factors keeping labor force participation low, a key factor in addressing the imbalance between open jobs and available workers. He said an important issue as been “excess retirements” during the Covid pandemic.

Sen. Sherrod Brown calls on Treasury Secretary Janet Yellen help rein in crypto

Bahamas-based crypto exchange FTX filed for bankruptcy in the U.S. on Nov. 11, 2022, seeking court protection as it looks for a way to return money to users.

Nurphoto | Nurphoto | Getty Images

Senate Banking Committee Chairman Sherrod Brown urged Treasury Secretary Janet Yellen on Wednesday to work with lawmakers and financial regulators to help write legislation to rein in the cryptocurrency market in the wake of the collapse of crypto exchange FTX.

In a letter to the Treasury chief, Brown, D-Ohio, told Yellen to incorporate recommendations from the Financial Stability Oversight Committee, including legislation that would “create authorities for regulators to have visibility into, and otherwise supervise, the activities of the affiliates and subsidiaries of crypto asset entities,” with financial regulators, such as the Securities and Exchange Commission and the Federal Reserve Board.

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An Oct. 3 FSOC report noted gaps in the regulation of crypto asset activities.

Brown sent the letter the day before Congress holds its first hearing on FTX’s collapse. The Senate Agriculture Committee has called Commodity Futures Trading Commission Chairman Rostin Behnam to testify Thursday on the firm’s dramatic and swift failure. Brown intends to hold his own hearing on FTX and its founder, Sam Bankman-Fried, in December, a spokesperson previously told CNBC.

“As we continue to learn more details, the failure of this crypto exchange brings to mind the litany of financial firm failures due to the combination of reckless risk taking and misconduct,” Brown wrote to Yellen. “It is crucial that risks in this area are contained and do not spillover into traditional financial markets and institutions, and we draw the correct lessons regarding customer and investor protection.”

When asked for comment, the Treasury Department referred CNBC to comments Yellen made at The New York Times’ DealBook Summit on Wednesday.

“To the extent that the crypto world could deliver faster, cheaper, safer transactions, we should be open to financial innovation,” Yellen said. “That said, that’s not what most of it has been about. And I strongly believed and continue to believe and I think everything we’ve lived through over the last couple of weeks, but earlier as well, says this is an industry that really needs to have adequate regulation. And it doesn’t.”

FTX filed for bankruptcy and its CEO, Bankman-Fried, stepped down earlier this month. The crypto giant was valued at $32 billion.

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In his letter, Brown warned that “FTX’s connections to other risky crypto firms likely deepened its losses and continue to send shock waves to other entities” and that the company “failed to exercise basic corporate controls or risk management over its operations.”

Close on FTX’s heels, crypto firm BlockFi filed for bankruptcy on Monday. The company listed an outstanding $275 million loan to FTX US in the filing.

Each company’s failure endangered more than 200,000 creditors.

Brown encouraged partnership between Congress, Treasury and the White House, even referencing the Treasury’s coordination with the President’s Working Group on Financial Markets. The group recommended legislation to regulate stablecoins, a brand of cryptocurrency, in a Nov. 1 report.

“Congress and the financial regulators must work to get all of this right. As more crypto failures occur, the age-old adage is more true than ever — if it seems too good to be true, it probably is,” Brown wrote.

European Central Bank says bitcoin is on the ‘road to irrelevance’

The bitcoin logo displayed on a smartphone with euro banknotes in the backgrouund.

Andrea Ronchini | NurPhoto via Getty Images

The European Central Bank gave a strong critique of bitcoin on Wednesday, saying the cryptocurrency is on a “road to irrelevance.”

In a blogpost titled “Bitcoin’s last stand,” ECB Director General Ulrich Bindseil and analyst Jürgen Schaff said that, for bitcoin’s proponents, the apparent stabilization in its price this week “signals a breather on the way to new heights.”

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“More likely, however, it is an artificially induced last gasp before the road to irrelevance — and this was already foreseeable before FTX went bust and sent the bitcoin price to well below USD16,000,” they wrote.

Bitcoin topped $17,000 on Wednesday, marking a two-week high for the world’s largest digital coin. However, it struggled to maintain that level, falling slightly to $16,875. Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, warned that the bounce is likely just a bear market rally and would not be sustained. “This is just a bearish retest,” he told CNBC.

The remarks from the ECB officials are timely, with the crypto industry reeling from one of its most catastrophic failures in recent history — the downfall of FTX, an exchange once valued at $32 billion. And the market has been largely down in the dumps this year amid higher interest rates from the Federal Reserve.

Bindseil and Schaff said that bitcoin didn’t fit the mold of an investment and wasn’t suitable as a means of payment, either.

“Bitcoin’s conceptual design and technological shortcomings make it questionable as a means of payment: real Bitcoin transactions are cumbersome, slow and expensive,” they wrote. “Bitcoin has never been used to any significant extent for legal real-world transactions.”

“Bitcoin is also not suitable as an investment. It does not generate cash flow (like real estate) or dividends (like equities), cannot be used productively (like commodities) or provide social benefits (like gold). The market valuation of Bitcoin is therefore based purely on speculation,” they added.

Analysts say that FTX’s insolvency is likely to hasten regulation of digital currencies. In the European Union, a new law called Markets in Crypto Assets, or MiCA, is expected to harmonize regulation of digital assets across the bloc.

Bindseil and Schaff said it was important not to mistake regulation as a sign of approval.

“The belief that space must be given to innovation at all costs stubbornly persists,” they said.

“Firstly, these technologies have so far created limited value for society — no matter how great the expectations for the future. Secondly, the use of a promising technology is not a sufficient condition for an added value of a product based on it.”

They also raised concerns with bitcoin’s poor environmental credentials. The cryptocurrency’s technical underpinnings are such that it requires a massive amount of computing power in order to verify and approve new transactions. Ethereum, the network behind bitcoin rival ether, recently transitioned to a new framework that backers say would cut its energy consumption by more than 99%.

“This inefficiency of the system is not a flaw but a feature,” Bindseil and Schaff said. “It is one of the peculiarities to guarantee the integrity of the completely decentralised system.”

It’s not the first time the ECB has raised doubts about digital currencies. ECB President Christine Lagarde in May said she thinks cryptocurrencies are “worth nothing.” Her comments came on the back of a separate scandal for the industry — the multibillion-dollar implosion of so-called stablecoin terraUSD.

CNBC’s Arjun Kharpal contributed to this report.

How a $60 billion crypto collapse got regulators worried

Job openings fall amid Fed efforts to cool labor market

Workers sort packages at a FedEx Express facility on Cyber Monday in Garden City, New York, on Monday, Nov. 28, 2022.

Michael Nagle | Bloomberg | Getty Images

Job openings dipped in October amid the Federal Reserve’s efforts to cool off a red-hot employment market, the Labor Department reported Wednesday.

The Job Openings and Labor Turnover Survey, a closely watched gauge of slack in the labor force, showed there were 10.3 million vacancies for the month. That’s a decline of 353,000 from September and down 760,000 compared to a year ago.

That left 1.7 job openings per available worker for the month, down from a 2 to 1 ratio just a few months ago.

The Fed has instituted a series of rate hikes aimed at bringing down runaway inflation. One area of particular focus has been the ultra-tight jobs market, with a 3.7% unemployment rate and wage gains that are helping to fuel price pressures.

While the monthly numbers can be volatile, the JOLTS report provided at least some measure that the Fed’s inflation-fighting efforts could be having an impact. The report came the same day that payroll processing firm ADP reported job gains of just 127,000 in November, the lowest total since January.

The quits level, a measure of worker confidence that they can easily move from one job to another, also declined, edging lower to 4.026 million, down 34,000 from a month ago and well below the record 4.5 million in November 2021 during what had been dubbed “The Great Resignation.”

Total separations nudged higher to 5.68 million while layoffs and discharges also rose, up 58,000 to 1.39 million.

The Labor Department on Friday will release payroll growth numbers for December. Economists expect job growth of 200,00 for the month, according to Dow Jones estimates.

CrowdStrike stock down on earnings, Morgan Stanley says buy the dip

George Kurtz, chief executive officer of CrowdStrike Inc., speaks during the Montgomery Summit in Santa Monica, California, U.S., on Wednesday, March 4, 2020. The Montgomery Summit gathers entrepreneurs, investors, and executives to discover the most important innovations in business and technology.

Patrick T. Fallon | Bloomberg | Getty Images

CrowdStrike shares fell about 19% on Wednesday morning, a day after the cybersecurity company reported third-quarter results that said new revenue growth was weaker than expected.

CrowdStrike reported annual recurring revenue (ARR) of $2.34 billion, up 54% year over year. More than $198 million was net new ARR added in the quarter, which ended Oct. 31. The company also added 1,460 net new subscription customers for the quarter.

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Stifel downgrades CrowdStrike, says tough macro backdrop is battering cybersecurity stock

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CEO George Kurtz said in a release that the company’s total net new ARR was below expectations. Last year, CrowdStrike’s ARR increased by more than 67% in the third quarter, and the company added 1,607 net new subscription customers for that same period.

Analysts at Morgan Stanley also said CrowdStrike’s results were “disappointing,” but they said estimates did not reflect the current macroeconomic environment. They encouraged investors to buy the sell-off in a Wednesday note. 

“With forward estimates appropriately level set, we think this pullback provides an attractive entry point to accumulate shares in a premier SaaS security franchise,” they said.

An analyst at Stifel said CrowdStrike’s results were “disappointing” and downgraded the stock from buy to hold.  

“Although management’s preliminary CY24 outlook was below consensus, we believe it could take a few quarters until expectations are fully de-risked, and as a result, we lower our rating to Hold,” they wrote in a Tuesday note. 

CrowdStrike’s stock is down more than 32% this year, and the analyst expects further downside ahead after the company issued light guidance. The analyst’s $120 price target, slashed from $225, is about 13% below where shares closed Tuesday.

Needham analysts said they remain a “convinced buyer” of CrowdStrike for the long term.

They believe the company’s slower guidance opened a “can of worms” about bear market concerns, but they said they think most of those concerns are “misplaced.”

“We suspect CRWD will find itself in the penalty box into year-end despite its strong growth, operating leverage and Cash Flow as investors worry about lengthening deal cycle time and potential for further deceleration,” they wrote Wednesday. “We remain positive on CRWD.”

—CNBC’s Michael Bloom contributed to this report. 

Private hiring increased by just 127,000 jobs in November, well below estimate, ADP reports

Private hiring slowed sharply during November in a sign that the historically tight labor market could be losing some steam, according to a report Wednesday from payroll processing firm ADP.

Companies added just 127,000 positions for the month, a steep reduction from the 239,000 the firm reported for October and well below the Dow Jones estimate for 190,000. It also was the lowest total since January.

The relatively weak total comes amid Federal Reserve efforts to loosen up a jobs picture in which there are still nearly two open positions for every available worker. The central bank has raised its benchmark borrowing rate six times this year, but the unemployment rate is still 3.7%, near the lowest since 1969.

“Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains,” said ADP’s chief economist, Nela Richardson. “In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing.”

The ADP report comes two days before the Labor Department releases its more closely watched nonfarm payrolls count. Economists polled by Dow Jones expect that report to show a gain of 200,000 after an increase of 261,000 in October.

In the ADP report, the biggest sector gainer by far was leisure and hospitality, which saw an increase of 224,000.

However, that was offset by losses in manufacturing (-100,000), professional and business services (-77,000), financial activities (-34,000), and information services (-25,000). Goods-producing industries overall saw a decline of 86,000 jobs, while services firms added 213,000 on net.

Even with the shaky jobs numbers, salaries continued to climb.

Pay increased 7.6% from a year ago, ADP said, though that was a slightly slower pace than the 7.7% reported for October.

From a size standpoint, all of the job creation came from companies that employ 50-499 workers, a sector that added 246,000 jobs. Small companies lost 51,000 while big firms were off 68,000.

Mortgage rates fall for the third straight week, but demand still drops further

A For Sale sign appears in front of a house on Oak Street in Patchogue, New York, on May 17, 2022.

Steve Pfost | Newsday | Getty Images

Mortgage rates soared over 7% just a month ago, but since then they have fallen more than half a percentage point. Still, mortgage loan application volume decreased 0.8% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The results also include an adjustment for the observance of the Thanksgiving holiday.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 6.49% from 6.67%, with points remaining at 0.68 (including the origination fee) for loans with a 20% down payment.

The weakness continues to be in refinance demand, which dropped 13% from the previous week and was 86% lower than the same week one year ago. Strange, given that roughly 100,000 more current borrowers could now benefit from a refinance with the latest rate drop, according to Black Knight.

Mortgage applications to purchase a home gained 4% from the previous week but demand was 41% lower than the same week one year ago. Sales of existing homes continue to drop, while newly built home sales are benefiting from builder concessions, specifically deals in which the builder buys down the mortgage rate.

“The economy here and abroad is weakening, which should lead to slower inflation and allow the Fed to slow the pace of rate hikes. Purchase activity increased slightly after adjusting for the Thanksgiving holiday, but the decline in rates was still not enough to bring back refinance activity,” noted Joel Kan, an MBA economist.

The adjustable-rate mortgage share of application activity increased slightly to 9%, which is lower than the roughly 12% range a month ago, when rates were higher. The ARM share, however, was about 3% at the start of this year, when the 30-year fixed rate hovered near a record low. ARM’s offer lower interest rates but higher risk.

Mortgage rates haven’t moved much to start this week, but by the end of the week that could change, as the highly anticipated monthly employment report is set for release. Any unanticipated swing in either direction will have a direct effect on mortgage rates.