November 5th, 2021 8:26 AM by Richard Sardella MLO.100007700/NMLS 233568
Jobs. October NFP jobs were expected +450K, as reported +531K and Sept jobs originally reported 194K were revised to +312K. Private jobs thought to be +400K jumped 604K and Sept revised from 317K to 365K. The unemployment rate at 4.6% down from 4.8% in Sept. Manufacturing jobs, (higher pay) expected +29K increased 60K. The labor participation rate actually declined, to 61.6% from 61.8%, implying less workers in the job market; something isn’t jelling when job growth is increasing and labor participation slows. Earnings are slowing; the average hourly earnings increased 0.4% as expected but down from +0.6% in September; yr./yr. though wages are increasing, +4.9% from 4.6% in Sept. Overall a stronger employment report than expected, unemployment declined, annual wages increasing; yet the reaction in the bond and mortgage markets are improving.
Delta cases declined. Employers desperate to hire to meet strong demand from consumers are rapidly raising wages, dangling bonuses and offering more flexible hours. Households are spending down a big pile of savings that had been boosted by federal stimulus money and extra unemployment benefits. The dip in the labor participation rate is surprising given the strong increase in jobs, may suggest more people retiring or just dropping out; we will let economists wade into that pool. With all of the stimulus money that was spent consumer savings increased; those savings—which at one point exceeded $2 trillion, according to private-sector estimates—have dwindled, though they remain elevated. As savings come down, some adults will return to the workforce starting this winter, some economists say. Yesterday weekly jobless claims at 269K were down 14K from the week before.
At 9:30 am ET the DJIA opened +199, NASDAQ +67, S&P +23. 10 yr. note 1.50% -2 bp. FNMA 2.5 30 yr. coupon at 9:30 am +13 bps and +24 bps from 9:30 am yesterday.
Increases in job growth, businesses continuing to increase wages and incentives to hire needed workers; inflation still running hot but central banks and now rate markets circling around less inflation than what was thought as recently as last month. Rate markets have been adjusting back to smaller inflation outlook. Today the strong employment data isn’t pushing rates higher, but lower. What should be going higher is going lower and feeding on itself.
Fundamentally the employment report this morning should be pressing on interest rates, but they are falling. We’ll take the improvements, but frankly the reaction today doesn’t make sense.
PRICES @ 10:00 AM
10 yr. note: 1.48% -4 bp
5 yr. note: 1.08% -3 bp
2 Yr. note: 0.43% unch
30 yr. bond: 1.91% -5 bp
Libor Rates: 1 mo. 0.089%; 3 mo. 0.144%; 6 mo. 0.213%; 1 yr. 0.362% (11/4/21)
30 yr. FNMA 3.0: @9:30 am 104.55 +11 bp (+16 bp from 9:30 am yesterday)
30 yr. FNMA 2.5: @9:30 am 103.05 +13 bp (+24 bp from 9:30 am yesterday)
30 yr. GNMA 2.5: @9:30 am 102.83 +13 bp (+16 bp from 9:30 am yesterday)
Dollar/Yuan: $6.4020 +$0.0045
Dollar/Yen: 113.66 -0.10 yen
Dollar/Euro: $1.1522 -$0.0035
Dollar Index: 94.50 +0.15
Gold: $1,799.10 +$5.60
Bitcoin: 61,704 +506
Crude Oil: $79.50 +$0.69
DJIA: 36,448 +323
NASDAQ: 16,012 +72
S&P 500: 4712 +32
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.