The bond market showed mixed signals today, as the jobs report indicated a stronger headline number than expected, but revisions and other factors tempered enthusiasm. The headline number came in at 253,000 job creations, above the expected 180,000. However, corrections for the last two months reduced job gains by almost 150,000, making the actual gains only 104,000. Further analysis suggests that the jobs number may need to be stronger, especially considering the birth-death model’s poor performance during inflection periods.
The household survey within the report revealed some underlying weaknesses, with only 139,000 job creations and a decrease of 43,000 in the labor force. The unemployment rate declined from 3.5% to 3.4% for the wrong reasons. The bond market reacted negatively to average hourly earnings increasing by half a percent, which indicates wage pressure and inflation.
Looking ahead, leisure and hospitality created 31,000 jobs, which is slowing down. Inflation data, wholesale inflation, and important bond auctions are expected next week. The May 10th date is anticipated as a potential turning point for housing data, especially regarding the shelter component of the Consumer Price Index.
The 10-year Treasury yield rose to 3.45%, while mortgage bonds are sandwiched between support and resistance levels. As the market continues to digest the jobs report, there is hoped to be some positive momentum heading into the weekend.
