Morning Report: Strong Jobs Report 5/5/17

Vital Statistics:

Last Change
S&P Futures 2389.0 3.5
Eurostoxx Index 391.7 -0.3
Oil (WTI) 45.1 -0.4
US dollar index 89.9
10 Year Govt Bond Yield 2.34%
Current Coupon Fannie Mae TBA 102.625
Current Coupon Ginnie Mae TBA 103.625
30 Year Fixed Rate Mortgage 4.02

Stocks are up after the strong jobs report. Bonds and MBS are up as well.

Jobs report data dump:

  • Nonfarm payrolls + 211,000
  • Unemployment rate 4.4%
  • Labor force participation rate 62.9%
  • Average hourly earnings up 0.3% MOM / 2.5% YOY

Overall a strong jobs report. The unemployment rate is the lowest in a decade, reaching close to the cyclical low right before the real estate bubble blew up. Despite the low numbers we have yet to see much in the way of wage growth. The employment-to-population ratio, which is the Fed’s preferred employment indicator, rose to 60.1%.  The U-6 unemployment indicator (which is more broad and includes the long-term unemployed) fell sharply during the month from 8.9% last month to 8.6%. U-6 is down 1.1% YOY. U-6 measures how much slack there is in the labor market, and as that slack is taken up wage inflation should return. This report shouldn’t really move the needle for the June FOMC meeting and the Fed.

Yesterday, the House passed narrowly its Obamacare replacement bill, and it will now head to the Senate where it will be ignored and slow-walked. The House bill was never scored by the CBO, and pushed through on short notice, which pretty much tips the GOP’s hand that this was never intended to actually become law and has a 0% chance of surviving intact. FWIW, the bill is really the Republican Primary Prevention Act of 2017, which is to say merely a political gambit. The Senate may also be waiting to see what insurance rates look like for 2018 and also how many drop out of the exchanges. The only way to get Democrats and moderate Republicans on board is if they see the Obamacare exchanges failing.

Now that Obamacare is out of the way in the House, their attention will turn to tax reform. Individual tax reform will get zero support from Democrats, however there might be some common ground on corporate taxes.

Fannie Mae reported income of $2.8 billion for the first quarter, all of which will go to the government sometime in June. Total equity has fallen from $6.1 billion at the end of last year to $3.4 billion at the end of Q1. This is the problem the government has to address with the current regime: sending all profit to Treasury is eroding Fannie’s capital. This is one motivation to get the government serious about GSE reform, although it isn’t a high priority in Washington at the moment.

Inflation continues to be tame, and part of that is being driven by oil, which has fallen 15% over the past few weeks. The rally in oil that began with OPEC’s plan to cut production has been completely given back. While the Fed will undoubtedly characterize oil as a transitory phenomenon it does flow through to other products and can help drive inflation.

25 Responses

  1. Lots of ululating out of the left over a political bill that has 0% chance of becoming law…


  2. Cinco de Mayo!

    New quiz:


    • 66% markets / 34% equality
      50% nation / 50% world
      65% liberty / 35% authority
      42% tradition / 58% progress.



    • 92.7% markets
      76.6% Nationalist
      60.4% Liberty
      54.2% Tradition

      Ultra Capitalist


    • Shocking!!

      Economic Axis: Socialist
      76.2% Equality/23.8% Markets

      Diplomatic Axis: Balanced
      40.4% Nation/59.6% World

      Civil Axis: Liberal
      64.2% Liberty/35.8% Authority

      Societal Axis: Progressive
      28.4% Tradition/71.6% Progress

      Democratic Socialist

      I can’t stand Sen Sanders, though. If I were queen, I’d throw him out of the party.


    • Something is off. Maybe I’m selling out.

      78.7 % Markets 21% Equality
      57% Nation 43% World
      60% Liberty 40% Authority
      44% Tradition 56% Progress



    • 64.0% Market, 36.0% Equality
      64.9% Nation vs. 35.1% World
      54.2% Liberty vs. 45.8% authority
      55.1% Tradition vs 44.9% progress.

      Closest Match: Moderate Conservatism

      damn, i’m out of the club, too.

      that test is flawed! edit — i wonder if it’s putting it’s thumb on the scale with tradition and interpreting those responses with an unsaid “the the gov should do something about it”


      • nova:

        i wonder if it’s putting it’s thumb on the scale with tradition and interpreting those responses with an unsaid “the the gov should do something about it”

        Definitely. Also, how likely is it that climate alarmists answered the religion questions honestly?


  3. Sometimes the far left has the best rants against the Democrats:

    “After more than a year of being told the world would end if Trump got in, Trump got in. After more than a year of being told Trump couldn’t win, Trump won. Democrats stood stupefied for a moment like a little kid who just got hit with a ball but hasn’t started crying yet… and then all the crazy came pouring right out into the open.

    It was Comey’s fault. No, it was Bernie’s fault. No, it was third parties. Wait, no, it was Russia. Yeah, that’s it! Russia. Russia, Russia, Russia Russia Russia. Everyone who says we’re acting crazy right now is a Russian agent. Isn’t the CIA awesome? Gosh I love the CIA. Also Dick Cheney and John McCain, they’re great too. Know who I hate though? Russia. Did you know Russian bots convinced Sanders supporters to hate Hillary Clinton? Also, any Sanders supporters you saw criticizing Hillary were actually Russian bots disguising as Bernie Bros. Basically Hillary was perfect and the DNC scandal never happened. If you think you hated Hillary you imagined it. Have I mentioned I hate Russia? They committed an act of war against us, you know. War war war war war war war. I like war now. Not Russia though. Have I mentioned I hate Russia?

    Sheer yammering lunacy. It’s like the lifetime’s worth of consent-manufacturing establishment media propaganda they’d been spoon-fed since birth suddenly started making them sick, like when you eat a few too many marshmallows or jello shots and it starts coming out the way it came in.”

    “McResistance oligarchic sycophants”

    View at

    McResistance is perfect.


  4. How much are low-income individuals willing to pay for health insurance, and what are the implications for insurance markets? Using administrative data from Massachusetts’ subsidized insurance exchange, we exploit discontinuities in the subsidy schedule to estimate willingness to pay and costs of insurance among low-income adults…For at least 70 percent of the low-income eligible population, we find that willingness to pay for insurance is far below the average cost curve – what it would cost insurers to provide coverage to all who would enroll if the premium were set equal to that WTP. Adverse selection exists, despite the presence of the coverage mandate, but is not the driving force behind low take up. We estimate that willingness to pay is only about one-third of own costs; thus even if insurers could offer actuarially fair, type-specific prices, at least 70 percent of the market would be uncovered.


    For example, we estimate that subsidizing insurer prices by 90% would lead only about three-quarters of potential enrollees to buy insurance.


    • Mark:

      Crony capitalism?

      Perhaps, but given that the program in question was created in the 1990s and currently operates under an authorization provided by Obama, it is hard to see how it is a reflection on the Trump admin.


  5. I laughed.

    In the letter, reported by CNN, Page suggested investigators should go to the Obama administration to get access to his communications, since he was reportedly under surveillance.


  6. You are a bad person if you send your children to private school. Not bad like murderer bad—but bad like ruining-one-of-our-nation’s-most-essential-institutions-in-order-to-get-what’s-best-for-your-kid bad. So, pretty bad.

    Liked by 1 person

    • Progressives: the biggest control freaks on the planet… The GOP has a blind spot with abortion and some of the other cultural issues, but geez, the Progressive Left has a blind spot on everything else…


      • Brent:

        The GOP has a blind spot with abortion…

        You’ve said this before, and I’m not sure why you consider it a blind spot. From an intellectual point of view, conservative opposition to legal abortion flows logically and inexorably from conservative premises about that nature of individual rights and the origins of human life. The premises can be disputed, I suppose, but I don’t think those premises are the result of being blind to some otherwise obvious reality.

        From a political/cultural point of view, I would make 2 points. First, the GOP view is hardly an outlier. Polls routinely show that roughly half the nation shares that official GOP view. And second, despite opposition to abortion playing a central role in Republican campaign politics, and despite several years in which R’s controlled all branches of the government, including a majority of R-appointed Supreme Court members for most of that time, in the 40 plus years since Roe v Wade was decided, R’s at the national level have done virtually nothing to make abortion less legal than it was in 1973. So perhaps the “official” view of the GOP is not the real view of the GOP, at least at the national level.


        • I was talking mainly about which party contains the biggest control freaks. The GOP can be control freaks on some social issues, but the Progressive Left are control freaks on everything else.


  7. Like

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