Friday, December 3, 2010

A swing and a miss.


Economists and analysis around the world were expecting a much stronger set of November payroll numbers than the Labor Department delivered this morning.



As the markets closed yesterday, participants were braced for a headline November payroll figure as high as 200,000 and a national jobless rate of 9.6% or lower. The actual numbers showed that the economy only created 39,000 more jobs than it lost last month while the national jobless rate surged to 9.8%. The September and October numbers were revised higher by a collective 38,000 jobs. Investors also made note of the fact that average hourly earnings remained flat last month - an indication that the consumer may not be in as good as shape to drive economic growth in the first-half of 2011 as most observers have been anticipating.



Judging by price action in the credit markets in the couple of hours following the release of the November nonfarm payroll data it appears that most market participants are choosing to largely shrug-off today's weak story from the job market as nothing more than the growing pains of an economy in transition from recession to recovery.



Looking ahead to next week the economic calendar is exceptionally light with little more than Thursday's initial weekly jobless claims number and October Wholesale Inventory data available for mortgage investors to chew on. The trend trajectory of mortgage interest rates over the coming five business days will be most strongly influenced by the Treasury Department's three scheduled auctions - Tuesday's $32 billion 3-year note sale, Wednesday's $21 billion 10-year note auction and Friday's $13 billion 30-year bond offering. The 3- and 10-year note offerings will likely draw decent demand - but the 30-year bond sale has the potential to create some notable upward pressure on mortgage interest rates. Heads up.