The Bond Market will be closing early at 2:00pm ET today and will be closed all day tomorrow in observation of Independence Day.
Stocks are higher and at new all-time highs and Mortgage Bonds are slightly lower after a stronger than anticipated BLS Jobs Report.
BLS Jobs Report
The Bureau of Labor Statistics (BLS) reported that there were 147,000 jobs created in June, which was above estimates of 110,000. The prior two months were revised slightly higher by 16,000, which is a change from all the negative revisions we have been seeing.
This report could not differ more from yesterday’s ADP report, which showed 33,000 job losses.
There were only 74,000 private sector payrolls, which is the weakest we have seen in a while, but there were an outsized 73,000 government jobs added. The majority or 63,000 were education at the State and Local levels. One might question how in June, when school is usually out for summer break, there are more education jobs added than usual. Interestingly, the raw figure for these jobs was -542,000, but after a very generous 605,000 seasonal adjustment, they reported 63,000.
The one bright spot of the report was lower wage pressured inflation. Average Hourly Earnings rose 0.2%, which was one tenth beneath estimates. Year over year, Average Hourly Earnings were reported at 3.7%, which was lower than the previous reading and forecast of 3.9%.
The average workweek fell 0.1 to 34.2 hours, and when extrapolating that to how many full-time job losses that would equate to, it’s just under 500,000.
When combing average hourly earnings and hours worked, take home pay or average weekly earnings, fell 0.1% in June and moderated from 3.9% to 3.4% year over year.
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 93,000 jobs created, which was weaker than the headline job figure. But since 130,000 people “left the labor force” or were no longer counted, the unemployment rate fell to 4.1%, but for the wrong reasons.
Initial Jobless Claims
The BLS reported that Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, fell slightly from 237,000 to 233,000. While this moderated slightly, it still remains at more elevated levels and has been higher for six weeks now.
Continuing Claims, which measures individuals who continue to receive benefits after their initial claim, remained at 1.964M. This is the sixth week above 1.9M and it appears to be approaching 2M fast.
Even though the Jobs Report showed a beat in terms of jobs created, continuing claims does show that people are remaining on unemployment benefits for longer because it’s harder to find a job…and that likely means less hiring.
Week Ahead
Tuesday: NFIB Small Business Optimism Index
Wednesday: Mortgage Apps, 10-year Auction, Fed Minutes
Thursday: Initial Jobless Claims, 30-year Auction
Technical Analysis
Mortgage Bonds are off their worst levels and continue to trade in a very wide range between support at 101.39 and overhead resistance at 101.82. Support was tested today, but held, helping Bonds to recover a bit.
The 10-year has at least temporarily broken above its 200-day Moving Average, but just barely. If yields can close beneath this level, it would be a good sign for the Bond market.
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