Morning Report: Jobs report misses and rates fall 6/2/17

Vital Statistics:

Last Change
S&P Futures 2434.3 4.8
Eurostoxx Index 394.3 2.6
Oil (WTI) 47.4 -1.0
US dollar index 88.5  
10 Year Govt Bond Yield 2.16%
Current Coupon Fannie Mae TBA 103.33
Current Coupon Ginnie Mae TBA 104.25
30 Year Fixed Rate Mortgage 3.94

Stocks are up this morning despite a miss on the jobs report. Bonds and MBS are up.

Jobs report data dump:

  • Nonfarm payrolls up 138k
  • Unemployment rate 4.3%
  • Employment to population ratio 60%
  • Labor force participation rate 62.7%
  • Average hourly earnings up 2.5% YOY
  • Average workweek 34.4 hours

The payroll number was a big miss from the 185k expectation, and differs wildly from the ADP payroll number yesterday of 253k. Yet another instance where the ADP number and the official BLS number aren’t even close to each other. Yes, the ADP number is meant to track the final revised BLS number, so it is possible that the BLS payroll number gets revised upward in the next two months. The labor force participation rate fell to 62.7% from 62.9% which was a disappointment as well. The unemployment rate fell to 4.3%, which is a 16 year low. The labor force shrunk by 430k people, while the number of people employed fell by 233k. The overall population increased by 180k. The two numbers the Fed pays the most attention to (employment / population ratio and hourly earnings) are certainly not pointing to any sort of inflation acceleration.

Despite the payroll number, the Fed Funds futures increased their probability of a June hike to 93%. The 10 year continues to rally, and we are at the lowest yields since early November. The Trump reflation trade continues to deflate, at least as far as bonds are concerned.

Construction spending continued its zigzag pattern, falling 1.4% MOM but increasing 6.7% YOY. Residential construction fell on a MOM basis but is up 16% YOY. Public residential construction fell.

The ISM Manufacturing Index ticked up last month, led by increases in new orders, production, and employment. The prices index fell by a lot, however which again shows the lack of inflationary pressures in the supply chain. The current levels so far in the PMI index correlates with a historical GDP growth rate of around 4%. While manufacturing isn’t the driver of the economy it used to be, it still matters.

Announced job cuts at Ford pushed up the Challenger job cuts number, but otherwise job cuts are largely small.

Donald Trump announced he will pull the US out of the Paris Accord yesterday. This will take years, so in the meantime expect no effects on oil prices or the economy.

Investment bank Moelis, along with Blackstone and Paulson fund management have reportedly put out a detailed blueprint to bring the GSEs out from under government control. Treasury Secretary Mnuchin as well as the MBA are cool to the idea, because existing stockholders will benefit, when in reality they would have been wiped out back when the GSEs went under conservatorship.

Home sizes are shrinking for the first time since 2009. This is mainly due to a change in the hombuilder mix. Post-crisis, the only segment of the homebuilding market that was working was the luxury end. Now, starter homes are becoming the focus, which is dragging average sizes lower. Home sizes are still larger than the bubble peaks were.

Small business lending fell in April.

36 Responses

  1. Frist on a Friday!

    Like

  2. Donald Trump announced he will pull the US out of the Paris Accord yesterday. This will take years, so in the meantime expect no effects on oil prices or the economy.

    “But, Dad! Everybody else is doing it!”

    “And if everybody else jumped off a bridge, would you do that, too?”

    Like

  3. Evildoing brain-dead conservatives who uncritically swallow talking points spoon-fed to them directly from Exxon via Fox news who hate renewable energy and want the planet to die in order to keep the coal industry in business…

    Liked by 1 person

  4. Shit just got real.

    “Crimes Against Design
    Jun 02
    Eamon Levesque

    Donald Trump isn’t just ruining lives. He’s ruining fashion.”

    https://www.jacobinmag.com/2017/06/trump-gucci-vetements-fashion-couture-art

    Hipster Marxism at it’s finest.

    Liked by 1 person

  5. Liked by 1 person

    • even better:

      Like

      • That is some woke shit.

        Like

        • woke af…

          it is about time someone had the courage to call out those Amish and Hassidic suicide bombers…

          Like

      • Maybe we can carpet bomb London with Coexist bumper stickers…

        Like

        • There are two sets of facts that both exist within one reality, but fuel separate narratives. First, a hugely disproportionate number of terrorist events are perpetrated by Islamist fundamentalists. Second, the vast majority of American Muslims are loyal citizens and patriotic Americans who are, incidentally, law enforcement’s best intelligence tool against the Islamist terrorists.

          It takes an adult mind able to hold two seemingly [although not really] different thoughts at the same time to accept this. Once it is accepted, it can be used to combat the Islamist terrorists while maintaining good neighbors who happen to be Muslims.

          UK and France have a more significant problem with local Islamist terrorists because radical Imams are not treated with the public suspicion they are here in the USA – law enforcement regularly follows them here and there are many fewer of them serving the 6 million Muslims in America. Also, Muslims are more ghettoized in the UK and FR, or so I have heard from Muslim friends, so it is somewhat easier to radicalize ‘Utes. Bringing in waves of immigrants who have little chance of escaping these ghettoes seems counterproductive, as well. Vetting them additionally for useful employable skills may be required as a security measure now. Bomb making would not count.

          I think it would have become eventually PC if all politicians had both recognized that Islamist terror is a distinct brand, and called it that, while making it clear that it was a phrase not to be conflated with unwarranted suspicion of Muslims in general. The hesitancy of many pols, especially Ds, to remark on Islamist terrorism as such, has been such overt pussyfooting around that it has made it easier for those who simply hate Muslims to make fun of the Ds as soft, while feeding their own broader agenda of Muslim exclusion.

          Like

        • I think it is simpler… The right thinks terrorism is a bigger affront than Islamophobia. The left thinks Islamophobia is a bigger affront than terrorism.

          Like

        • “Simpler” is the problem here.

          Terrorism must be fought with the available tools and trading in Islamophobia shuts down one of the available tools, maybe even breeds more terrorism on the margins, so both should be out in the open and dealt with honestly.

          That this became a left-right deal is the fault of the left in my view.

          Like

        • That this became a left-right deal is the fault of the left in my view.

          Liberal moral dilemma: ISIS does a series of abortion clinic bombings. Who does the left side with?

          Like

        • “I think it would have become eventually PC if all politicians had both recognized that Islamist terror is a distinct brand, and called it that, while making it clear that it was a phrase not to be conflated with unwarranted suspicion of Muslims in general.”

          All things considered, I think George W. Bush actually did the best job of messaging here with “Islamofascism” while also regularly drawing a distinction with moderate Muslims.

          He also had enough credibility so that his outreach wasn’t viewed as being soft.

          Like

        • Agreed on GWB having kept both thoughts at once, and doing it well, except for the slip of mentioning the Crusades. Again, the lefty response was the beginning of the current inability it seems for politicians to do anything but simplify into counterproductive memes.

          Like

      • The phrase “the wind between my butt cheeks” was new to me.

        Like

      • “Men and religion are worthless.”

        The historicity of that statement simply cannot be debated. Name a single thing any man has ever done for humanity, ever, in the history of everything. Or anything great that has ever been accomplished by religious people or in the name of religion. Can’t be done.

        Like

  6. This is a good piece even though the author is a commie bastard.

    View story at Medium.com

    Plus, it confirms my biases

    Like

    • “That’s what I want to talk about today: how white supremacy and oppression manifest themselves in mainstream animal rights organizing/ideologies — and what we can all do to challenge that.”

      Can’t be parodied.

      Like

  7. I honestly don’t give a shot about this guy, he helped make the bed, lay in it.

    http://hotair.com/archives/2017/06/04/bret-weinstein-evergreen-theyre-not-waking/

    Like

  8. If true, wow….

    8 days into Ramadan and 41 terror attacks?

    Like

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