Morning Report: June payrolls rebound in a big way 7/8/16

Vital Statistics: Last Change
S&P Futures 2112.0 15.0
Eurostoxx Index 324.3 2.1
Oil (WTI) 45.5 0.4
US dollar index 87.1 0.1
10 Year Govt Bond Yield 1.41%
BankRate 30 Year Fixed Rate Mortgage 3.44

Stocks are higher after the jobs report came in stronger than expected. Bonds and MBS are down small

Jobs report data dump:

  • Nonfarm payrolls + 287k
  • Two month revision -6k
  • Unemployment rate 4.9%
  • Labor force participation rate 62.7%
  • Average weekly hours 34.4
  • Average hourly earnings + 0.1% (+2.6% YOY)

The payrolls number is certain to get everyone’s attention, however some of that might be a catch-up from May, which was revised downward to only 11k jobs. The 3 month average is 147k. Given Brexit, this report probably doesn’t move the needle for the Fed. Until we start seeing more evidence of wage inflation the Fed isn’t going to be aggressive.

Mortgage rates have lagged the move downward in Treasuries. As we saw in 2012, bond yields bottomed out in July, but mortgage rates continued to fall for another 4 months, finally bottoming in November. We are seeing the same thing again, where mortgage rates have fallen with the 10 year, but nowhere near as dramatically. Note the MBA keeps bumping up its forecast for 2016 volume.

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