Employment Day

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It is the first Friday of the month and its employment day. Always a volatile report, today no different. April unemployment declined to 7.5% frm 7.6% last month, markets expected unchanged at 7.6%. Non-farm jobs, expected +153K, increased to 165K; after Wednesday’s ADP miss on job growth many traders were expecting the BLS report to be less not more. Private jobs increased 176K, about right on the early estimates before the ADP data. The unemployment rate is the lowest since Sec 2008. Not only a better than expected April report but March and Feb data were revised higher; Feb jobs originally at +258K revised to +332K, March jobs originally at +88K revised to +138K. Temporary-help services added 30,800 workers to payrolls in April, the most since February 2012. Other industries adding jobs included leisure and hospitality, retail trade and education and health services. Today’s employment report also showed average hourly earnings rose 1.9% from a year earlier to $23.87.  The number of employees not working a full week rose to 27.5 million from 27.4 million. Some 278,000 more employees were working part-time for economic reasons. The workweek shrank to 34.4 hours for all U.S. employees on average from 34.6 hours in March. Part of the reason may be reflected in an increase in part-time employment. The report is hyping the bulls this morning, it is the wild and wooly employment report that is one month of data subject to future revisions. Although better, the number of workers is still very low. That said in the current environment even weak news is ignored and when there is better news than expected look out; investors and traders keep pushing the stock market higher. It is early with a lot of trade left today. Look for some easing and backing off frm the strong early trade in equity markets and early selling in the bond and mortgage markets. The stronger employment report did what you would expect, sent the 10 yr note yield up and mortgage prices down. At 9:30 ahead of two more reports at 10:00 had the DJIA open +81, NASDAQ +31, S&P +11. The 10 yr at 9:30 -21/32 (62 bp) to 1.70% +7 bp frm yesterday’s close. 30 yr MBS price -40 bp frm yesterday’s close. At 10:00 the April ISM services sector index, expected at 54.0 frm 54.4 in March, as reported the index fell to 53.1 the lowest since July 2012. Yet another weaker than thought data point that may temper a little the strong employment data. Also at 10:00 March factory orders were also weaker than expected, -4.0% against -3.0% forecasts. The DJIA hitting 15K this morning, interest rates up. The 10 yr yield jumped to its 20 day average at 1.71%, up 8 bp frm yesterday’s close. We noted earlier this week that market volatility would increase, we are seeing it today. Technically the note should hold at its chart support at 1.75%. Through the week we thought the 10 would eventually test 1.56%, the low set last Dec; we still believe it will be achieved, however after today’s employment report has temporarily lessened the recent sentiment that the economy was cooling will take time and more data to re-establish the bullish trend. The increase in treasury rates this morning erased all the decline over the last two weeks, in less than one hour. For the moment we will continue to recommend floating, however the employment report this morning has put a big damper on the bullish outlook for the time being.