Employment Situation Day, Rates Rally
Posted 12-03-2010 at 08:32 AM by VictorBurek
This morning the Bureau of Labor Statistics released the most important economic report we receive monthly…the Employment Situation Report. This release provides four headline measures on the health of the jobs sector:
1. Nonfarm Payrolls: totals the number of jobs that were added to or cut from employer payrolls in the prior month. This report counts both the private sector and government jobs. Consensus Forecast: +150,000 vs. +151,000 in October (The private sector consensus for +152,000 vs 159,000 last month)
2. Unemployment Rate: the percentage of working-age, mentally able-Americans who are jobless. Consensus Forecast: 9.6% of the labor force vs. 9.6% last month
3. Average Hourly Earnings: the average amount of earnings per hour of labor performed. Consensus Forecast: +0.2% vs. +0.2% last month.
4. Average Work Week: average amount of hours worked by an employee per week. Consensus Forecast: 34.3 hours vs. 34.3 last month.
Here are the results and they are very disappointing:
1. Nonfarm Payrolls: +39,000 in November with the private sector adding +50,000 jobs. October and September were revised better to show an additional 38,000 new jobs. Even when you add the revisions to this month’s total, it was still a huge miss. However, it was still the 11th straight month of private sector payroll growth. WORSE THAN EXPECTED
2. Unemployment Rate: rose to 9.8% WORSE THAN EXPECTED
3. Average Hourly Earnings: 0.0% WORSE THAN EXPECTED
4. Average Work Week: unchanged at 34.3 hours
Following the release, stock market futures turned much lower and bonds are rallying. If you floated, you will be rewarded this morning with better rate sheets.
We still had two other reports this morning…Factory Orders and the ISM Non-Manufacturing Index.
The Department of Commerce released the monthly Factory Orders report. This data represents the value of new orders placed for both durable and non-durable goods. Durable goods are products that have a life expectancy of at least three years such as autos, computers, machinery. Non-durable goods are products that can only be used one time or a product with less than a three year life expectancy. New orders is a forward looking indicating of industrial output. If orders are increasing, it indicates manufactures will be busier in the months ahead as they ramp up production to meet the demand. Busier factories can lead to additional hiring which is good for the overall economy and the equities market. To remind readers, as a general rule positive economic data benefits the stock market while negative economic data benefits the bond market and low mortgage rates.
The report indicated factory orders were in line with expectations. New orders for manufactured goods fell -0.9% in October vs -1.0% that was expected. There was also a revision higher of September’s orders from +2.1 % to +3.0%.
Released at the same time was the ISM Non-Manufacturing Index. This report gives us a look into the strength of the non manufacturing sector of our economy. Readings above 50 indicate expanding or improving conditions while readings below 50 indicate contraction or worsening conditions. This report is a lower tier report and historically has had minimal effect on the overall market sentiment. Last month’s report rose 1.1 points to 54.3.
The index indicated the non-manufacturing sector of our economy improved to a print of 55.0, matching expectations. Following the release of the last two reports, stocks reversed course which is taking away momentum from the bond market rally.
Lender rate sheets are improved this morning. The par 30 year conventional rate mortgage is back in the 4.375% to 4.625% range for well qualified consumers. If you are seeking a 15 year term, you should expect a par rate in the 3.75% to 4.00% range. To secure a par interest rate, you must be willing to pay all closing costs associated with your loan including an estimated one point loan origination/discount/broker fee. You may elect to pay less in costs, but you will have to accept a higher rate. This is a good option for those home owners not planning on keeping the current home for more than 3 years.
If you have been floating, you can lock today at better terms as lenders have passed along much better rate sheets. If closing in under a week, i would recommend you lock today and take advantage of those price gains. If you have time before closing, i would float over the weekend to see if the bond market rally can continue. We lost a lot over the last couple days due to optimism of a positive jobs report and we haven’t even recaptured half those losses.
1. Nonfarm Payrolls: totals the number of jobs that were added to or cut from employer payrolls in the prior month. This report counts both the private sector and government jobs. Consensus Forecast: +150,000 vs. +151,000 in October (The private sector consensus for +152,000 vs 159,000 last month)
2. Unemployment Rate: the percentage of working-age, mentally able-Americans who are jobless. Consensus Forecast: 9.6% of the labor force vs. 9.6% last month
3. Average Hourly Earnings: the average amount of earnings per hour of labor performed. Consensus Forecast: +0.2% vs. +0.2% last month.
4. Average Work Week: average amount of hours worked by an employee per week. Consensus Forecast: 34.3 hours vs. 34.3 last month.
Here are the results and they are very disappointing:
1. Nonfarm Payrolls: +39,000 in November with the private sector adding +50,000 jobs. October and September were revised better to show an additional 38,000 new jobs. Even when you add the revisions to this month’s total, it was still a huge miss. However, it was still the 11th straight month of private sector payroll growth. WORSE THAN EXPECTED
2. Unemployment Rate: rose to 9.8% WORSE THAN EXPECTED
3. Average Hourly Earnings: 0.0% WORSE THAN EXPECTED
4. Average Work Week: unchanged at 34.3 hours
Following the release, stock market futures turned much lower and bonds are rallying. If you floated, you will be rewarded this morning with better rate sheets.
We still had two other reports this morning…Factory Orders and the ISM Non-Manufacturing Index.
The Department of Commerce released the monthly Factory Orders report. This data represents the value of new orders placed for both durable and non-durable goods. Durable goods are products that have a life expectancy of at least three years such as autos, computers, machinery. Non-durable goods are products that can only be used one time or a product with less than a three year life expectancy. New orders is a forward looking indicating of industrial output. If orders are increasing, it indicates manufactures will be busier in the months ahead as they ramp up production to meet the demand. Busier factories can lead to additional hiring which is good for the overall economy and the equities market. To remind readers, as a general rule positive economic data benefits the stock market while negative economic data benefits the bond market and low mortgage rates.
The report indicated factory orders were in line with expectations. New orders for manufactured goods fell -0.9% in October vs -1.0% that was expected. There was also a revision higher of September’s orders from +2.1 % to +3.0%.
Released at the same time was the ISM Non-Manufacturing Index. This report gives us a look into the strength of the non manufacturing sector of our economy. Readings above 50 indicate expanding or improving conditions while readings below 50 indicate contraction or worsening conditions. This report is a lower tier report and historically has had minimal effect on the overall market sentiment. Last month’s report rose 1.1 points to 54.3.
The index indicated the non-manufacturing sector of our economy improved to a print of 55.0, matching expectations. Following the release of the last two reports, stocks reversed course which is taking away momentum from the bond market rally.
Lender rate sheets are improved this morning. The par 30 year conventional rate mortgage is back in the 4.375% to 4.625% range for well qualified consumers. If you are seeking a 15 year term, you should expect a par rate in the 3.75% to 4.00% range. To secure a par interest rate, you must be willing to pay all closing costs associated with your loan including an estimated one point loan origination/discount/broker fee. You may elect to pay less in costs, but you will have to accept a higher rate. This is a good option for those home owners not planning on keeping the current home for more than 3 years.
If you have been floating, you can lock today at better terms as lenders have passed along much better rate sheets. If closing in under a week, i would recommend you lock today and take advantage of those price gains. If you have time before closing, i would float over the weekend to see if the bond market rally can continue. We lost a lot over the last couple days due to optimism of a positive jobs report and we haven’t even recaptured half those losses.
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