Stocks and Mortgage Bonds are both lower so far this morning. Bonds are breaking beneath support and 10-year yields are breaking above resistance, which is a negative sign for rates. Tomorrow’s Jobs Report will be key for the markets and will set the tone for Bonds.
Initial Jobless Claims
Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, rose 6,000 to 225,000. One reason could be the gig economy – If people are let go they may choose to work for companies like Uber or Instacart, instead of filing for unemployment benefits. Additionally, a lot of the layoffs are in the technology sector, where a lot of employees receive generous severance packages, which would delay the process. In any case, this figure continue to remain subdued, showing that employers are holding onto their workers.
Continuing Claims, which measures Individuals continuing to receive benefits after their initial claim, remained pretty steady at 1.83M, which is still hovering near the highest levels since November of 2021. This continues to show that the slowdown in hiring as it’s harder to find a job once let go and people remain on benefits for longer. This figure has continued to remain at elevated levels, despite some people’s benefits expiring.
Challenger Job Cut Report
While a volatile report, job cut announcements in September were about 50% higher than they were this time last year. Additionally, the hiring plans year to date are the lowest we have seen in 11 years.
In September, the hiring plans were 403,891, but 401,850 were from seasonal employers, which means that less than 2,000 were non-seasonal hires…showing that outside of employers stocking up ahead of the holidays, there is not a lot of hiring going on.
Comparatively, last year in September the hiring plans were 590,353, of which 552,800 were seasonal…meaning that there was about 40,000 non-seasonal hires vs less than 2,000 this year.
Jobs Report Strategy
The Jobs Report is always a tough one to handicap, especially since the BLS has not been very reliable with their numbers and the revisions have been astronomical.
With that being said, there are a few things that point to a potential upside beat – The Sample Initial Jobless Claims report, which encompasses the 12th of the month, was low at 222,000 and would point to a stronger Jobs Report…at least from that one component.
Additionally, the ADP report on Wednesday was stronger than expectations. We also heard from Powell earlier in the week, and he sounded more optimistic on the labor market – No one knows for sure, but it would appear that he could have some insights we are unaware of and maybe he got a sneak preview of the data ahead of time.
One thing to keep an eye out for is the unemployment rate – Last month it fell from 4.3% to 4.2%, but in reality it declined from 4.25% to 4.22%...meaning that it only came down 0.03%, but due to rounding, it looked like it improved one tenth. It’s expected to remain at 4.2%, but would not take much to move higher.
Technical Analysis
The charts will take a backseat to tomorrow’s Jobs Report, but they do not look favorable. Mortgage Bonds have now convincingly broken beneath support at the 25-day Moving Average and looks destined to re-test the 50-day down at 100.84.
The 10-year has broken above 3.80% and looks like it wants to test the 50-day Moving Average at 3.84%.
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