November Employment report at 830am was generally in line with estimates. Today’s news will feature the unemployment rate dropp to 8.6% from 9.0%; non-farm hobs increased 120k while private non-farm jobs increased 140k, average hourly earnings are +0.1%. The unemployment rate is the lowest since March 2009 but there is a hitch to the headline; the labor participation rate declined to 64.0% from 64.2% implying that more poential workers have stopped looking for a job. The decrease in the jobless rate refelcted a 278k gain in emlployment at the same time 315k Americans left the labor force. Revisions to September and October added 72k more jobs than originally reported. The U-6 underemployment rate declined from 16.2% to 15.6%. It included part-time workers who’d prefer a full-time position and people who want work but have given up looking.
That non-farm jobs increased 120k reflects many jobs are temporary hirings for the holidays, the reaction in the bond and mortgage markets wasn’t much change from yesterday’s closes although slightly lower as traders dicsount the decline in the unemployment rate and job growth was fractionally lower than general estimates. The stock indexes were trading better prior to 830am on the back of continued improvement Europe’s equity markets; there was little change in the indexes following the report.
In Europe there is some increased optimism that the debt crisis may be helped by the ECB funneling funds to the IMFthen the IMF leverages the funds and provides funds to Italy and Spain taking them back from the abyss. Next Friday Europe’s leaders will meet in a summit in Brussels, the meeting must end with something more than what the world has had to swallow for two years…a lot of talk but little action. Given the improvement in Europe’s equity markets this week and the best week for Italy’s and Spain’s 2-Year Note yields this week, optimism is increasing.
At930am the DJIA opened 90 pponts better, the 10-Year Note was -9.32 at 2.12%, a near term support level and mortgage prices fell off ust 4/32 (.12 bps).
So far today the Employment Report has had little impact on the U.S. Financial markets. The bellwether 10-Year Note has near-term support at 2.12% that hs been tested a few times and held. At 1000am it traded at 2.11% after ending yesterday at 2.10% after moving to 2.14% in intraday trading. mortgages have been held captive in a 50 basis points (bps) price range for three weeks now while the 10-Year Note volatility swings its yields from 2.12% to 1.86% on every sentence out of the mouths of Europe’s leaders.
We haven’t changed our outlook that the U.S. interest rate markets are unlikely to decline much from the present levels and have more potential to rise from that decline. While Europe’s mess will take years to resolve the markets now are believing that a plan will surface soon that will remove much of concern that Europe’s banks would fail. Over the last couple of weeks the safety moves into U.S. treasuries has ebbed substantially. We can argue that the U.S. economy won’t improve much based on the housing market and the high level of unemployment, however trading in the equity markets implies investors are increasingly more optimistic about the future. Either way one must see the reality that no one is sure; this has lead to huge swings in the indexes and contributed to keeping interest rates from falling futher.
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