Morning Report: Decent jobs report 11/4/16

Vital Statistics:

Last Change
S&P Futures 2085.7 2.0
Eurostoxx Index 328.9 -2.6
Oil (WTI) 44.1 -0.6
US dollar index 87.7 0.0
10 Year Govt Bond Yield 1.79%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 3.61

Stocks are higher after a decent jobs report. Bonds and MBS are up as well.

Jobs report data dump:

  • Payrolls increased by 161,000
  • Unemployment rate 4.9%
  • Labor Force Participation rate 62.8%
  • Average hourly earnings 0.4%

The payroll data was disappointing, as was the decrease in the labor force participation rate. The plus side was wage growth, where wages rose at a 2.8% annual rate, the biggest increase since 2009. The employment to population ratio slipped to 59.7%. Basically, it looks like the number of unemployed fell, however they didn’t get jobs – they exited the labor force. Below is a chart of average hourly earnings. You can see the slope of the line decrease in 2008 as the Great Recession began and wage growth slipped from its bubble year growth rate of 3.3% to 2%, where it largely stayed during the recovery. It appears like the slope of the line is beginning to increase, which solves a lot of problems in our economy. Too early to tell if it is a trend, though. Bottom line: This gives the Fed all the ammo they need to raise the Fed Funds rate next month. FWIW, the Fed Funds futures are now assigning a 80% chance of a 25 basis point hike next month.

hourly-earnings

Ordinarily, this report would be bond bearish, however global sovereigns are rallying and pulling the 10 year along for the ride.

Ex Dallas Fed Head Richard Fisher blames the rise of Donald Trump partially on Fed policy. The Fed’s policy of driving interest rates to the floor and flooding the system with money to support asset prices is great news for people who own real estate and stocks, however for those that save it has been terrible:

“Global monetary policy has “skewered the middle-income groups, the ‘middle class,’ adding to the angst that has sprung from their sense of an overbearing, intrusive central government….Small wonder that we have ended up at a political crossroad, with a choice for the presidency between a candidate who advocates having government distribute still more to ease the pain and another arguing to provide relief by changing gears entirely, though we know not how, when or where…My more acerbic friends on both sides of the aisle consider it a Hobson’s choice,” he said, referring to a situation where it seems there’s free choice but in reality there’s no good alternative. On the one hand, Republicans believe the other party’s candidate is channeling Eva Peron, planning policies that will ultimately lead us down the Argentine path to economic ruin while basking in personal profit and glory. On the other, Democrats liken the Republican candidate to Caligula.”

On the subject of QE, he is spot-on. QE and unconventional monetary policy has certainly increased inequality, and made life tough if you are a renter. Rental inflation is increasing at a 4% annual clip, and as we saw above, wages are well below that. QE has been great for the landlord, but not the tenant. I find it amazing that the Fed gets a free pass in the media and from the political class on the subject of inequality.

For all the sturm and drang regarding how markets will react to a Trump presidency, bond traders appear to be relatively sanguine. Just like stocks have the VIX index which measures fear indirectly by tracking the price of options, bonds have an index too. And it is close to yearly lows.

40 Responses

  1. New Republic is on a roll:

    “David Brooks’s endorsement of Hillary Clinton is a gift to Donald Trump.”

    https://newrepublic.com/minutes/138439/david-brookss-endorsement-hillary-clinton-gift-donald-trump

    And yes it is:

    “The Banality of Change
    David Brooks
    NOV. 4, 2016”

    http://www.nytimes.com/2016/11/04/opinion/the-banality-of-change.html

    Classic Brooks category error:

    “Let’s start with what “change” actually means. In our system, change means legislation.”

    Only to you and the progressives/liberals/Democrats.

    Like

    • Only slightly less insufferable than Flathead’s column:

      http://www.nytimes.com/2016/11/02/opinion/donald-trump-voters-just-hear-me-out.html

      Like

      • Before I read it, was there a taxi driver involved?

        Like

      • “This is my last column until after the election, so I’d like to address the people least likely to read it: Donald Trump voters.”

        He starts out by saying he doesn’t expect idiotic bigots like Trump voters to read the words of an erudite and intelligent fellow like himself. What a great start.

        “While Clinton has failed to inspire, her instincts and ideas will keep us hewing to basically the right course. And however great her flaws, she is still in the zone of human decency.”

        Are we sure about that? Or does she just have the good sense to keep it off the stump and out of her public speeches? Most of the time?

        Like

    • “David Brooks’s endorsement of Hillary Clinton is a gift to Donald Trump. Normally, getting the support of a prominent right-wing pundit would be a real boon to a liberal politician like Clinton, since it would get her message out to voters outside her fold.”

      David Brooks is a right wing pundit? On what planet?

      “But Brooks’s support for Clinton was phrased with such a mixture of elitism and condescension”

      Is that different from any other Brooks column?

      “The entire passage has the tone of John Steinbeck as re-written by Thurston Howell III, the clueless millionaire from Gilligan’s Island”

      The author may not know what constitutes a right wing pundit, but that’s beautiful writing right there.

      After Brooks describes a stereo-typical toothless hayseed he considered representative of your average Trump voter, he says this:

      “One of the mandates for the next president is to help improve the life stories of people like that.”

      No, that’s not a frickin’ mandate for the president. Read the gödeldammêd constitution, you beatnik.

      “Trump speaks to this man’s situation and makes him feel heard. But when you think practically about which candidate could improve his life, it’s clear that Clinton is the bigger change agent.”

      OMG. I wouldn’t vote for Trump at this point if this were a swing-state and it might be might vote alone that could hand HRC the presidency. But really? HRC is going to be a change agent for rural, hardscrabble guys seeking out some kind of middle-lower class to upper-lower class living out there? Again, on what fückïng planet?

      “But Clinton does possess the steady, pedantic skill”

      I’ve seen no sign that Clinton is pedantic. Seriously, “you mean wipe the server with rag”? In fact, neither “steady” nor “pedantic” seem like good or remotely accurate descriptions of HRC or the Clinton’s in general.

      “f the Clinton campaign emails have taught us anything, it is that she and her team, while not hugely creative, are prudent”

      I’m pretty sure the email stuff hasn’t taught anybody that HRC and her team are prudent.

      That said, I find this all far better than David Frum’s endorsement of Hillary. At the least, the end of of David Frum’s endorsement:

      “Your hand may hesitate to put a mark beside the name, Hillary Clinton. You’re not doing it for her. The vote you cast is for the republic and the Constitution.”

      Oh, that’s a “do as your intellectual betters instruct you” that’s going to convince rural folks with missing teeth not to vote for Trump.

      These people are detached from reality.

      Like

  2. So VA is close (I guess? — it’s probably really not) and am I really willing to gamble with Trump?

    Like

    • Vote for the Crook. It’s Important.

      I think Trump is going to do better than people think. Scott Adams couldn’t have called this “Third Act” plot twist any better.

      It’s unfortunate that you can’t make the vote for the President contingent on their being impeached immediately so that the Vice President actually assumes office.

      Liked by 1 person

      • I take it you’re in the same boat. this sucks.
        edit — and yes, he’ll over perform. i don’t think he’ll win, b/c i don’t see him flipping a blue state. it’s possible, and i’ve said as much (which was inferred to be an endorsement)

        Like

        • I think HRC is worried about PA.

          Like

        • McWing:

          I think HRC is worried about PA.

          I spent last night and all day today driving down route 81, through Pennsylvania and Virginia. I have no idea if this is at all significant, but all through PA and VA I have seen lots of Trump signs, both off the highway and on cars. Didn’t see one, single HRC sign or bumper sticker. Seriously, not one. 81 goes through mostly rural PA and Western VA, so that might have something to do with it.

          BTW, I’m currently stopped in Charlotte, sitting in a bar. Thinking about making a show of trying to use the women’s room just to see what happens.

          Like

        • Ballsy, er, ovaryer.

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        • Is a tranny obligated to lower the lid?

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        • I am married to the best woman ever. I have never lowered the lid and never once heard a complaint about it.

          Once I told her how great she was about that. She smiled and walked away. I asked why she was smiling. She said she was pretty sure that if she made an issue about it I would comply, but piss on the seat. And she never had a problem dropping the seat as long as I never complained about the bang. Which I never did.

          But I digress.

          Like

        • Yes I am. I think Trump is under polling due to the vilification. If he’s within 2% I see him taking it.

          I also think the typical Democratic voter groups outside of the hard core base are less enthused about her and less likely to turn out than is being allowed for. The downplaying of specific news is telling.

          Still, if the Republic is going to collapse, might as well be over Anthony Weiner’s dick pics.

          He’s our Caligula.

          Like

        • jnc:

          He’s our Caligula.

          Lol

          Like

        • NY is going to go for Hil no matter what, so I can safely vote for GJ.

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        • Brent:

          NY is going to go for Hil no matter what, so I can safely vote for GJ.

          Same situation. CT is going for HRC, so I can safely vote for Barry Goldwater.

          Like

  3. Rosanne and I early voted today. Observations:
    1] early voting is heavy on this last day, and coupled with the preceding days about 50% of Travis County eligible voters will have voted by tonight.
    This is apparently mirrored across Texas.
    2] Most people were ticket splitting, judging by their time in the box.
    3] We have a powerful but mis-named bureaucracy in Texas called The Railroad Commission. It does not regulate railroads. It regulates O&G. The Commission has been a landing place for motley pols who want to serve the industry and line their pockets for later Congressional races. Well, this time a Libertarian geophysicist, with industry background and academic experience as well, is running on a shoestring against hacks from both of the big parties. He wants to change the name of the Commission so folks will know what it actually does. He wants to apply actual technical expertise to technical issues. He is endorsed by the major newspapers. He has spent nothing. I have some hope for him. We’ll see.

    Like

  4. Yeah, the guy who wrote this is a political hack who is in the tank for Trump.

    http://www.greenbag.org/v10n4/v10n4_comey.pdf

    Like

  5. Rolling Stone lost the lawsuit:

    “Jury finds reporter, Rolling Stone responsible for defaming U-Va. dean with gang rape story
    By T. Rees Shapiro
    November 4 at 1:47 PM”

    https://www.washingtonpost.com/local/education/jury-finds-reporter-rolling-stone-responsible-for-defaming-u-va-dean-with-gang-rape-story/2016/11/04/aaf407fa-a1e8-11e6-a44d-cc2898cfab06_story.html

    Like

  6. Trump supporter blocked me on Facebook for pointing out a fake story about FBI leaker being killed by Hillary was fake news from a fake site. Was accused of supporting a “decile rapist c**t. What an election year!

    Like

  7. Like

  8. Love how Wikileaks showed John Harwood asking Podesta what questions he should ask Jeb Bush before an interview…

    Like

  9. Dayum, NoVA; the Stillers were awful today. Go, Ravens!

    Like

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