Morning Report: Strong jobs report

Vital Statistics:


Last Change
S&P futures 2701 -2.75
Eurostoxx index 358.09 -0.56
Oil (WTI) 53.82 0.02
10 year government bond yield 2.65%
30 year fixed rate mortgage 4.35%


Stocks are flattish after the jobs report. Bonds and MBS are up.


Jobs report data dump:

  • Nonfarm payrolls up 304,000
  • Labor force participation rate 63.2%
  • Unemployment rate 4%
  • Average hourly earnings up 3.2% YOY
  • Employment-population ratio 60.7%

Overall, an exceptionally strong report. The uptick in payrolls was almost double the market expectations, and the government shutdown had no appreciable effect (Furloughed employees were counted as “employed” by the survey.  The uptick in wages probably knocked bonds down a touch, but we have been seeing real wage gains in the employment situation report and the employment cost index. Sad trombone for partisans and the business press rooting for a shutdown-depressed report.


The unemployment rate has been rising, but that is actually good news as it means more and more of the long-term unemployed are being drawn back into the labor force. The labor force participation rate is a bit of a nebulous number because people who have been unemployed for a long time may not count as unemployed. The employment-population ratio is a much better measure, although you have to deal with demographic noise. The employment-population ratio rose 0.1% to 60.7%. A year ago it was 60.2%. While that is much higher than the 58.5% we saw at the depths of the Great Recession, it is still lower than the 62% – 63% pre-crisis level. Retiring baby boomers are being replaced by Millennials, but there is a lag.


employment population ratio


New home sales rose to a seasonally-adjusted average of 657,000 in November. The new home sales number is extraordinarily volatile – it is up 17% from October, but down 8% from a year ago – but it is somewhat encouraging as we head into the spring selling season, which despite the polar vortex upon us, unofficially starts about now.


Employment compensation costs rose 0.7% in the fourth quarter, as wages and salaries rose 0.6% and benefit costs rose 0.7%. For the prior 12 months, employment compensation costs rose 2.9%, with wages and salaries rising 3.1% and benefit costs rising 2.8%. With core inflation stuck around 2%, we are seeing over 1% real wage growth, which is strong indeed.


Wapo published a story about Trump possibly naming erstwhile R politician Herman Cain to the Fed. Cue the snide jokes: Can’t wait for his 3-3-3 plan: 3% Fed funds rate, 3% interest on excess reserves, 3% of QE portfolio runoff per year. In all seriousness though, he ran the Kansas City Fed from 92-96. So what appears at first to be an applause line in fact might not be. That said, these jobs generally go to academics and he is not one.

30 Responses

  1. The irony of a progressive being appalled by a Twitter mob.


    • #HasJustineLandedYet

      they really didn’t think the weapon they created could be pointed at them.


    • I don’t understand what their problem is with learning to code. Obama said everybody has to learn to code.

      And I love how they don’t understand how Twitter actually works until they come after the journalists.

      I think this goes back to their incurable fantasy that being part of the “4th estate” is a lot like being elected president, only better, and confers upon them rights and privileges and moral superiority that the common people do not have and don’t deserve.

      Otherwise, they’d be able to recognize the very human tendency–demonstrated daily–to be a dick online.


    • I find it funny in revealing the “fetid origins” they don’t mention Obama, or his admonition that everybody needs to learn to code, sometimes said in reference to job losses.


    • i don’t see why “re-privatizing” Fan and Fred means the stockholders should get anything. The stock would have been wiped out had the company gone through a normal BK.


      • But they didn’t. The government cheated.

        My own preference would be to have a plan to wind them down completely over five years and leave the FHA as the only entity involved in homeownership at the federal level.

        If that means that the 30 year fixed rate no prepayment penalty mortgage goes away, then so be it.


        • the government played dirty pool, no doubt. but that doesn’t mean the stock should be worth something.


        • Why shouldn’t it be worth something?

          The government got paid back more than 100%. They specifically gamed the system so that there wasn’t a bankruptcy so no reason to let them have it both ways.


        • in a bk, the crammed down stockholders and creditors don’t get a claim on the post-org performance once the new creditors earn back the original claim.

          the stock was always going to be worthless. Now, I do think the $50 billion in pref holders have a legit beef with the government regarding what they knew about the GSE’s precarious financial situation in summer of 2008.


        • I fully understand how bankruptcy cramdown works, but the government chose not to do that.

          They don’t get to unilaterally declare the stock worthless for the shareholders while also pretending that they haven’t taken the GSE’s over and avoiding putting the whole thing in front of a federal judge so the shareholders get their day in court.


  2. Pass the popcorn:

    “It might be a sign of the end-times, or simply a function of our currently scrambled politics, but earlier this week, four feminist activists — three from a self-described radical feminist organization Women’s Liberation Front — appeared on a panel at the Heritage Foundation. Together they argued that sex was fundamentally biological, and not socially constructed, and that there is a difference between women and trans women that needs to be respected. For this, they were given a rousing round of applause by the Trump supporters, religious-right members, natural law theorists, and conservative intellectuals who comprised much of the crowd. If you think I’ve just discovered an extremely potent strain of weed and am hallucinating, check out the video of the event.”


  3. Everything in American politics that’s not about electing the establishment Democrat is orchestrated by the Russians.

    “No third-party candidate can win the presidency, even if he’s Theodore Roosevelt. All Schultz can do is siphon votes away from the Democratic ticket, much as Jill Stein did in 2016. Stein, we now know, was a useful idiot for the Russians in their scheme to help facilitate Trump’s victory. Schultz may be less innocent. In recent years, Starbucks has been making deals in Russia, where its outlets have proliferated. For all we know, there was a plan to place a Starbucks in Trump’s ill-fated Moscow Trump Tower to match the one in Trump Tower on Fifth Avenue. Time for another Steele dossier!”


    • These folks are out of their minds. The red scare stuff made more sense when there were nuclear bombs attached. But the way it has proliferated post-Trump . . . while I’m sure the Russians have been up to some shenanigans, I don’t think there was anything exceptional going on in 2016 compared to say 2014 or 2012, just variations on the theme.

      Evoking the Russians left and right sounds so transparently fantastical and imaginary to me I’m amazed they can’t hear it themselves. But apparently they can’t.


  4. OMFG.

    Some of the best people ever were racists! So it’s okay when you’re a Democrat.

    From CNN. Man does the DNC own them or what?

    Edit: Actual CNN link might be better:


  5. Sharia in Europe, a good read.


  6. What’s funny is that in the end he’ll endorse the Democrat POTUS nominee.

    Even if he’s the Republican POTUS nominee.


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