Stocks are higher and Mortgage Bonds are lower following a stronger than anticipated BLS Jobs Report.
Jobs Report
The Bureau of Labor Statistics (BLS) reported that there were 177,000 jobs created in April, which was stronger than estimates of 130,000. Tempering the headline beat were revisions to the prior two months - February was revised lower by 15,000 from 117,000 to 102,000, while March was revised lower by 43,000 from 228,000 to 185,000. The combined negative revisions was 58,000 lower, which tempers today’s gain.
Average Hourly Earnings rose 0.2%, which was below estimates of 0.3%. Year over year, Average Hourly Earnings were reported at 3.8%, which was lower than estimates of 3.9%. There is clearly less wage-pressured inflation.
Average Weekly Earnings, which measures take home pay, and factors in average hourly earnings and hours worked, rose by 0.17%. Hours worked were unchanged after the upward one tenth revision to the prior report at 34.3. Average Weekly Earnings were up by 4.1%, which is up from 3.5% in March.
There are two surveys within the Jobs report, the Business Survey and the Household Survey. The Business Survey is where the headline job creation number comes from, and the Household Survey is where the unemployment rate comes from.
The Household Survey showed that there were 436,000 job gains, but the labor force increased by a slightly higher number of 518,000. Despite there being more people counted, the unemployment rate stayed at 4.2%. The exact unemployment rate was 4.19%, which was rounded up to 4.2%.
The U-6 unemployment rate, which adds everyone back in and is more indicative of the real unemployment rate, declined from 7.9% to 7.8%.
News Next Week
Tuesday: 10-Year Note Auction
Wednesday: Mortgage Apps, Fed Meeting
Thursday: Initial Jobless Claims, 30-year Auction
Technical Analysis
Mortgage Bonds have broken beneath support at the 50-day Moving Average, as well as the important 200-day Moving Average. Bonds are now clinging to the 25-day, but if that level is broken, the next stop is the 100-day Moving Average, roughly 23bp beneath present levels. As we have seen in the past, it’s possible for the Bond market to reverse some of these losses intraday as the internals and revisions are digested…a close above the 200-day would be a good sign.
The 10-year broke above its 200-day Moving Average and is now testing a dual overhead ceiling of resistance at the 25 and 50-day Moving Averages, which is keeping yields from moving higher for now.
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