Morning Report – Strong jobs data 2/6/15

Markets are higher this morning after a very strong jobs report. Bonds and MBS are down.
Jobs report data dump:
  • Nonfarm payrolls + 257k
  • Two month payroll revision + 147k
  • Unemployment rate 5.7% (increase of .1%)
  • Average Hourly earnings +.5% MOM
  • Average Hourly earnings + 2.2% YOY
  • Average Weekly Hours 34.6
  • Labor Force Participation rate 62.9% (increase of .2%)
  • Underemployment rate 11.3% (increase of .1%)
Overall, a very strong report, especially with the two month revision and the increase in wages. Bonds sold off hard on the number, although Euro bonds are off as well, so the global backdrop is “risk-on.” BLS did the annual revision to the data series this month, so there may be some technical factors in the data. This report certainly adds weight to the hawks who want to see rates increase and worry that the Fed is behind the curve.
Notwithstanding the average hourly earnings increase, I still don’t see much in the way of wage inflation. I suspect some of the increase is due to people who have variable compensation – people on commissions, people who get production bonuses, etc. When the economy improves, they do better, however that increase can be temporary. Are “base wages” increasing? It certainly doesn’t fell like it is yet.
Final job report observation: the feared job losses in the energy patch have yet to materialize.
Grandpa, tell me again about what it was like when interest rates were set by people in colorful jackets shouting at each other in a big room… Goodbye pit traders..

15 Responses

  1. At some point one would think that governments would know better than to do business with Goldman at all.

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    • jnc:

      At some point one would think that governments would know better than to do business with Goldman at all.

      A good indication of the type of people working in government.

      But this particular one is especially egregious. I spent half an hour trying to figure out exactly what the payout formula entailed but was thoroughly unsuccessful, and I do this for a living. In the Jefferson County debacle, at least the underlying transaction that ended up blowing up could plausibly be seen as a reasonable proposal. If you remember, the swap was designed to lower interest costs by taking on the correlation risk between the muni rate and libor, a correlation that had existed but disappeared in 2008, turning the deal sour. But in this case, if the Independent article is even marginally close to being truthful (not exactly a given, BTW) there is no conceivable reason anyone, much less a utility or municipality, would do that deal except as an elaborate and complex piece of speculation on the relationship between various tenors, rates, and currencies. It’s not a hedge to anything and it’s not an effort to lower costs by taking some reasonably understood and predictable risk.

      We were talking about this in the office today, and I said that it was simply inexplicable that an even moderately responsible treasurer might agree to do such a complex deal. The most plausible explanation, as stated by my colleague, was that he must have been “all liquored and hookered up when he signed off.”

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  2. Creative coercion vis-a-vis vaccines:

    “Revoke the license of any doctor who opposes vaccination
    By Arthur L. Caplan February 6 at 2:58 PM”

    http://www.washingtonpost.com/opinions/revoke-the-license-of-any-doctor-who-opposes-vaccination/2015/02/06/11a05e50-ad7f-11e4-9c91-e9d2f9fde644_story.html?tid=trending_strip_4

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  3. Any indication on whether Goldman was acting in an advisory capacity to the Portuguese state-owned train and subway company? Presumably that would have been a conflict of interest, not that they would have cared.

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    • jnc:

      Any indication on whether Goldman was acting in an advisory capacity to the Portuguese state-owned train and subway company?

      Not sure, but I would guess not. Although whoever was their advisor should probably go to jail.

      Like

  4. Back in my day, it was Solly doing those trades, not Goldman..

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  5. Brent, would production bonuses tend to show up in December? Small businesses that are on an accrual basis often pay out year end calculated bonuses as late as March of the subsequent year. However, CBA’s often have productivity bonuses due right before Xmas. I assume FRB economists [if not BLS] have determined when most bonuses are actually paid and it is available in the literature, but the web seems full of articles about various companies rather than about gross impacts.

    My good friend who was chief economist for the Dallas FRB would have been a source but he is retired for several years now.

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    • HRC is going to propose “changing labor laws to give workers more collective bargaining power.” Amy Chozick in The New York Times.

      Another way to alienate small business – and then the Ds wonder why they aren’t popular on Main Street, even with social moderates.

      Like

  6. Interesting framing:

    “Why is it something that you find offensive? What is it about austerity that you take personally?

    Part of it is because what I think the financial crisis is best seen as — and we’re still dealing with the aftermath of it, whether we like it or not — is that there’s a class-specific put option.”

    http://www.salon.com/2015/02/09/its_complete_horse_sht_watch_an_ivy_league_professor_dismantle_gops_austerity_lie/

    Of course, being Salon, apparently Angela Merkel is now part of the Republican party.

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  7. @Mark: I think so, however I would imagine the seasonal adjustments take care of it.

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