Morning Report: Decent jobs report 10/7/16

Posted on October 7, 2016 by Brent Nyitray

Vital Statistics:

Last Change
S&P Futures 2156.0 -1.0
Eurostoxx Index 340.7 -2.0
Oil (WTI) 50.2 -0.3
US dollar index 87.7 0.0
10 Year Govt Bond Yield 1.76%
Current Coupon Fannie Mae TBA 103.3
Current Coupon Ginnie Mae TBA 104.2
30 Year Fixed Rate Mortgage 3.54

 

Stocks are flat this morning after an ok jobs report. Bonds and MBS are down.
Jobs report data dump:
  • Nonfarm payrolls increased by 156,000 (August revised upward)
  • Unemployment rate 5%
  • Labor Force Participation Rate 62.9%
  • Average weekly earnings up 0.2% (2.6% annually)
  • Average weekly hours 34.4
Overall, a decent report, but nothing to write home about. The best news in the report was the increase in the participation rate as the labor force increased by about 440k while the number of employed increased by about 350k. The labor force participation rate looks like it may have bottomed, at least for now.

Global sovereign debt continues its sell-off, with the German Bund venturing back into positive yield territory. Overnight we had a flash crash in the British pound, which fell 6%. For currency traders, a 6% move is gargantuan.
We will have a lot of Fed-speak today, with Stanley Fischer at 10:30, Loretta Mester at 12:45, Esther George at 3:00 pm and Lael Brainard at 4:00.
Bank of America is out with a report saying that the new populism and push-back against globalization represents a possible sea-change in asset pricing. The big picture is that we are moving from a “deflation” asset pricing environment to an inflation asset pricing environment. Corporate profitability will suffer as wages increase, regulation increases, and people push back against using globalization as a means of cost-cutting. Government attempts to goose the economy will transition from monetary stimulus to fiscal stimulus. Overall, bad for bonds, but probably good for real estate.

Assuming Hillary wins, she may face the same nemesis her husband did early in his first term: bond market vigilantes. Every time Bill Clinton talked about stimulating the economy, bonds would sell off, which would offset any potential stimulative effect. Bob Woodward said that Bill Clinton’s reaction to this dynamic as :”You mean to tell me that the success of my program and my reelection hinges on the Federal Reserve and a bunch of f*****g bond traders?” Clinton political adviser James Carville said at the time that “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”
Regardless of what this does to the refi market, it should positively affect the purchase market. Currently, the homeownership percentage for the Millennials is about 34%. That number should increase to above 40% as the Millennial age cohort hits homebuying age. The homeownership rate for the 35-45 age cohort has historically been 60%+. So there is a lot of pent-up demand for homes, which should keep the purchase business humming for many years to come.

Filed under: Economy, Morning Report |

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25 Responses

  1. markinaustin, on October 7, 2016 at 12:47 pm said:

    So there is a lot of pent-up demand for homes, which should keep the purchase business humming for many years to come.

    Sounds good. My youngest daughter, the pharmacist, is probably a millenial – I never know exactly where these arbitrary lines are drawn. So she bought her own home, as a single woman, before she was 30. Not typical. What I see typically leads me to think when interest rates eventually rise lots of first time buyers just won’t be able to afford anything, in the same places where the jobs are, but aren’t going house shopping in the places where the prices are low and the jobs are scarce.

    FRIST.

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  2. jnc4p, on October 7, 2016 at 1:25 pm said:

    This sort of lecture should work great on getting Millennials back in the fold, given how effective it was when lobbed at Sanders supporters in the primaries:

    “What’s Millennials’ Support for Jill Stein and Gary Johnson All About?

    Harold Meyerson
    October 6, 2016

    White skin privilege, that’s what.”

    http://prospect.org/article/what%E2%80%99s-millennials%E2%80%99-support-jill-stein-and-gary-johnson-all-about

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    • Let the mutherfuker burn!, on October 7, 2016 at 5:54 pm said:

      The comments are hilarious.

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    • Kevin S. Willis, on October 7, 2016 at 9:14 pm said:

      “He did not respond to requests for comment from The Washington Post.”

      Huh. Can’t imagine why.

      This comment seemed the most relevant: “How often does being referred to by your gender pronoun actually occur while you are present? The only times I can think of when a person would be using a gender pronoun associated with someone is if they were talking about, or referencing, the person to someone else. Otherwise, if they are present when you are referring to them, why not use their name? That seems more respectful than using an impersonal pronoun for referring to them when they are standing right there.”

      Which suggests it’s all sound and fury, per usual, signifying nothing.

      Like

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    • Brent Nyitray, on October 9, 2016 at 2:28 pm said:

      I still cannot fathom the thinking from the left that the way to follow up their victory on SSM is to go to the mat on drag queens using the women’s john and not something useful like legalizing pot…

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  4. Michigoose, on October 9, 2016 at 6:31 am said:

    Greg’s Sunday Open Thread today (10/9) is a piece on Sue, if any of you would like to go leave a comment.

    Like

    Reply
  5. ScottC, on October 9, 2016 at 8:12 am said:

    How is the fact that this only goes to “some” Olympic medal winners not an obvious violation of the equal protection clause?

    http://www.wsj.com/articles/president-signs-bill-to-give-tax-break-to-some-olympic-medal-winners-1475876742

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  7. Let the mutherfuker burn!, on October 9, 2016 at 12:15 pm said:

    White feminists FTW!

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  8. Brent Nyitray, on October 9, 2016 at 2:12 pm said:

    I would give Trump mad props if he answers the inevitable question about the tape tonight with: “Well, Anderson, I was a democrat when I made those statements and therefore I should be given the same pass from the media that Bill Clinton and Ted Kennedy got.”

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  9. Let the mutherfuker burn!, on October 9, 2016 at 6:48 pm said:

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    • Brent Nyitray, on October 9, 2016 at 7:19 pm said:

      A variation of the “Just because we called Mitt Romney, John McCain, George W Bush, Bob Dole, George H.W. Bush, Ronald Reagan, Gerald Ford, and Richard Nixon racists doesn’t mean we don’t really really mean it this time.”

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