Bracing for Tomorrow’s BLS Report

US stocks are up sharply this morning, and are again within striking distance of new all-time high levels.  This comes on the heels of the US and South Korea taking part of a joint exercise where two B-1B bombers, four F-15 fighter jets and four F-35B fighter jets flew over the Korean Peninsula.  This stage of force was designed to North Korea’s repeated ballistic missile tests as well as their continued development of nuclear weapons.  Although there has yet to be a response from North Korea, my bet is that it will not go unmentioned.  The battle with North Korea could continue to escalate.  However, the stock market doesn’t seem to currently show concern over the risk.

Tomorrow is Jobs Day, with the Bureau of Labor Statistics (BLS) set to announce their estimate of new hires for the month of August.  The market is currently anticipating somewhere in the range of 180,000 new hires, with the Unemployment Rate to hold steady at 4.3%.  Given the strength of Wednesday’s ADP report, combined with the recent trend of the BLS estimates being below reality, there’s a good chance we could see a number much higher than what most economists believe.  Even more important will be the Average Hourly Earnings report, which is a leading indicator of inflation.  Since most of the jobs in the ADP report were from the service sector, it seems this number will be strong, but not exceedingly high.  Our bet is that the overall report will add upward pressure to mortgage interest rates.  However, we will see how reality plays out. 

We will maintain our locking bias.