A Strong Job Number Shocks the Markets

The Bureau of Labor Statistics (BLS) report on job growth in the month of November is in and was much stronger than the market was anticipating. Projections were in the 180,000 range. However, the headline number reported that 266,000 new jobs were created last month. Additionally, there were upward revisions to the prior two months’ reports that added another 41,000.  Still after accounting for the roughly 50,000 of this number that were from GM employees returning after a strike, it is still a strong number and points to continued strength in the labor market.

In addition to strong job gains, the BLS report showed that the Unemployment Rate ticked lower, falling from 3.6% down to match the nearly 50 year low of 3.5%.  Although this is an exceptionally strong number, it could point to troubles ahead for the labor market.  In 100% of the cases where the Unemployment Rate hit a cycle low, it was followed by a strong jump in job losses.  Is 3.5% as low as this cycle will bring?  It’s difficult to say for sure.  However, it is reasonable to assume that it is at least close to a cycle low.  It would be irrational to assume that we would see this number fall much lower.  If that is the case, we will be in for a jump as the next step.

Mortgage bonds remain under pressure and stocks continue to trade higher.  We will maintain our locking bias.