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| Friday, November 05, 2010 | ||
| Oct job gains were substantially stronger than the overall consensus; non-farm payrolls were expected to increase by 60K, as reported jobs increased 151K. Not only Oct jobs out-stripped estimates, there were sizeable upward revisions in Sept and Aug; Sept non farm jobs was revised from -95K to -41K and August revised to -1K from -57K originally reported----a total of 110K increase from what had been reported. The unemployment rate was unchanged at 9.6%. Average hourly earnings increased 0.2% and is up 1.7% since last Oct. Private hiring, which excludes government agencies, rose 159,000 in October, the biggest gain since April. Economists projected an 80,000 gain, the survey showed. Manufacturing payrolls unexpectedly decreased by 7,000 last month. Economists had projected a gain of 5,000. Government payrolls decreased by 8,000. State and local governments reduced employment by 7,000, while the federal government trimmed 1,000 jobs.
The employment report is good news for the economy, but keep it in perspective. Over the past three months based on the Oct data and revisions in Sept and August non-farm jobs increased a total of 269K, averaging 89K a month; any increases are welcome news but employment is still not gaining much. With 80K to 100K new job entrants each month it would take job increases of 300K a month to even dent the unemployment picture.
The initial reaction sent treasuries and mortgages down in price and up in yield. The 10 yr note price plunged 27/32, mortgages started -12/32 (.37 bp). By 9:00 some stability; the 10 yr -12/21 and mortgages -5/32 (.15 bp). Not much reaction in the equity markets early on after the recent strong rallies recently. The dollar is stronger this morning on the payroll data, hindering equity advances in early activity. At 9:30 the DJIA opened -17, the 10 yr -6/32 at 2.51% +2 bp, mortgages getting hit harder, down 10?32 (.31 bp) frm yesterday's close. By 10:00 the 10 yr note back to about unchanged but mortgages still pressured.
The Fed's QE on Wednesday pushed the 10 yr note down just 10 basis points, mortgage rates down 5 basis points. Today's job report has momentarily taken the wind out of the sails on the QE easing. A lot of day left to work over the better report on jobs; a solid report but on the margin the reaction in the financial markets isn't as strong as we might have expected. Comments on CNBC calling the jobs report a very strong report, and the President applauding; although any improvement is welcome, the job market remains impaired and not even meeting the increase in population increases. The dollar rallied on the data but since is slipping, the stock indexes firmed but on the open the DJIA opened weaker and is about unchanged at 10:00, the treasury market is weaker but given recent volatility, not that bad. The hit is coming most in the mortgage market so far; lenders sitting on large long positions selling mortgages.
Nothing left today but a couple for Fedsters making speeches that won't reveal anything of substance. Next week however, adding a little more pressure on interest rates, the Nov quarterly refunding with auctions totaling $72B; less than the August refunding but auctions on 10 yr and 30 yr bonds may drag on any significant price improving until the auctions are completed. Next week's economic calendar is very skimpy with weekly claims about it. | ||
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