Morning Report: More info on unemployment

Vital Statistics:


  Last Change
S&P futures 3842 14.3
Oil (WTI) 62.33 -1.14
10 year government bond yield   1.47%
30 year fixed rate mortgage   3.23%

Stocks are higher this morning after yesterday’s wild ride in the bond market. Bonds and MBS are up.


Yesterday was an absolutely incredible day in the bond market with the 10 year yield hitting 1.61% at one point. While there are some technical issues for the move, the punch line is that we are seeing a similar phenomenon to the 2016 Donald Trump “reflation trade” where bonds sold off and stocks rallied in response to his election. This time though, the sell-off is global. We have seen yields rise in the UK, Japan, Germany, and Australia.


Personal incomes rose 10% in January due to stimulus payments. Personal consumption rose 2.4%, while the personal consumption expenditure index (PCE – the Fed’s preferred measure of inflation) rose 0.3% MOM and 1.5% YOY. Two things jump out at me regarding this report: First, people are saving their stimulus payments, not spending them (10% increase in income versus 2.4% increase in spending). Second, inflation is still below the Fed’s target. So, while the bond market thinks the Great Reflation is happening, so far we aren’t seeing it in the data.


Just for fun, I decided to create a graph showing initial jobless claims by week in 2009 (the depth of the Great Recession) versus last year. I think this puts the shock into perspective:

While that chart does look dismal, the chart of continuing claims (meaning the cumulative number of people claiming benefits has been falling pretty steadily. Continuing claims are now about where they were in early 2010

Don’t forget, the recovery during the Great Recession was during the aftermath of a residential real estate bubble, which are the Hurricane Katrinas of economies. This time around, real estate prices are rising smartly, which is adding to people’s wealth, not subtracting from it.


Rocket announced earnings this morning, and the stock is up 10%. (See, all is not bleak for mortgage originators). For the year, volumes rose 121% to 320 billion. GAAP earnings per share came in at $1.76.

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