Friday, February 5, 2010

Some poems don't rhyme, some stories don't have a clear beginning, middle and end, and some economic reports are completely buggered up. Today's January nonfarm payroll is an excellent example of economic data that leaves everybody scratching their head in confusion.



As you undoubtedly know by now the Labor Department reported the economy shed 20,000 jobs last month after losing a revised 150,000 jobs in December. That's bad. November's headline payroll data was revised to a show a gain of 64,000, up from the originally reported gain of 4,000. That's good. Annual benchmark revisions to the payroll data showed job losses since the recession began were much deeper than originally thought. In all, according to government data wonks the economy has lost 8.4 million jobs since the start of the recession in December 2007. That's bad. But don't despair, the unemployment rate, based on a separate survey of households, fell to 9.7% in January from 10.0% in December - and that's very good.


Confused? Yeah - you're not the only one. It appears the Labor Department is taking a page from history and following former President Harry Truman's advice suggesting, "If you can't convince 'em - confuse em." If so -- kudos to the folks at the Labor Department for a job extremely well done. It appears mortgage investors and other capital market participants have also decided to throw their hands up and completely discount today's employment report -- rather than sort out its many possible nuances.



Looking ahead to next week Uncle Sam will be in the credit markets for three successive days beginning on Tuesday -- looking to borrow a total of $81 billion in the form of 3- and 10-year notes together with a package of 30-year bonds. It will be a relatively light week in terms of economic reports but you can bet traders will pay attention when the January Retail Sales figures are released on Thursday. The consensus estimate is currently projecting a strong 0.5% gain for retail sales last month. If the consensus estimate proves accurate, look for mortgage interest rates to edge fractionally higher.