Good morning, everyone. Today’s focus is on the latest jobs report, which initially seemed strong but may not be as robust as it appears. Mortgage-backed securities are currently down by eight basis points, showing a market still trying to digest the implications of this jobs data fully. Let’s break down the details and understand why this report might be misleading.
The December Jobs Report: A Closer Look
On the surface, the December jobs report showed a creation of 216,000 jobs, surpassing estimates. However, previous months saw a downward revision of 71,000 jobs, tempering the impact of this headline number. The initial reaction to the report caused a drop in mortgage-backed securities, but as the market examines the details, we might see some recovery.
BLS Data and Revisions
There’s a notable pattern in the Bureau of Labor Statistics (BLS) data, where initial job creation numbers are often revised downwards in subsequent months. This trend raises questions about the reliability of the initial figures and suggests that the current report’s strength might be overstated.
Wage Pressure and Average Working Hours
The report showed an unexpected rise in average hourly earnings, which could indicate wage pressure inflation. However, average weekly hours worked declined, which could balance out the impact of higher hourly wages on overall earnings.
The Household Survey Discrepancies
The household survey, which determines the unemployment rate, showed a loss of 683,000 jobs, contradicting the positive headline figure. The unemployment rate remained at 3.7%, but this was due to a large number of people exiting the labor force. If these individuals were counted, the unemployment rate would likely be higher. This discrepancy indicates a weaker labor market than the headline numbers suggest.
CoreLogic Housing Data
CoreLogic’s loan performance insights for October show healthy figures across delinquency and foreclosure rates, indicating stability in the housing market. We encourage you to participate in our housing survey to gain insights into local market conditions.
Technical Analysis: Mortgage-Backed Securities and Treasury Yields
As we examine the charts, mortgage-backed securities have been on a downward trend since the start of the year, struggling to maintain the gains seen since October. The 10-year Treasury yield, currently at an important resistance level, broke out of its falling trendline but now faces multiple resistance levels.
We hope for improvements in the market throughout the day and into next week, especially with the CPI data potentially showing a decline. We will continue with a floating stance and keep you updated on any significant market movements.
Wishing you all a great day as we navigate these market dynamics. Stay tuned for further updates and insights.
