Friday, Ocotber 8, 2010

The Labor Department reported earlier this morning that the economy shed more jobs in September than the vast majority of analysts had anticipated. September marked the fourth straight month the economy created fewer jobs than it lost. Nonfarm payrolls dropped 95,000 last month. Private employment increased 64,000, less than expected, while government payrolls declined by 159,000 jobs, including 77,000 Census workers. The employment rate remained unchanged at 9.6% -- held down by fewer new entrants joining the labor force and more discouraged workers giving up the job search and moving to the sidelines.



The jobless rate has equaled or exceeded 9.5% for 14 consecutive months, surpassing the 13-month period from mid 1982 to 1983 as the longest span of elevated joblessness since monthly records began in 1948. The length of the average work week and average hourly earnings were both unchanged on a month-over-month basis.



Today's dismal employment report essentially guarantees the Fed will choose to launch another quantitative easing effort - with a formal announcement likely coming by the conclusion of the Federal Open Market Committee's 2-day meeting on November 2nd and 3rd. Mortgage investors have already largely priced-in expectations that the Fed will authorize the direct purchase of at least $1 trillion worth of Treasury debt obligations as part of their effort to rekindle economic activity.



Looking ahead to the coming week Uncle Sam will be conducting a three-part debt auction from Tuesday through Thursday, composed of 3- and 10-year notes together with a batch of 30-year bonds. The inflation data contained in Thursday's producer price index and Friday's consumer price index is expected to be mortgage market neutral. Friday's September Retail Sales number is also not expected to cause much of a stir in the mortgage market.


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