Disappointing Job Creations

Good morning everyone and happy Friday!

The stock market is up over 60 bps this morning despite disappointing BLS job creation numbers. The BLS came in at 245k job creations last month. This is a massive miss from the 500k projected creations. We talked about the unemployment report yesterday being skewed because there tends to be a slow in layoffs during the holiday season but the even larger factor is that over 400k people dropped out of the labor force. Between the lack of job creations and the labor force fallout, employment is not looking good heading into the holiday season.

We will be getting inflation numbers next week. The last inflation report was good news for mortgage backed securities as it was flat from the prior month. However, inflation grew 1.4% during the 5 months prior. We will be watching this report closely as it has the potential to cause massive volatility in the mortgage backed security market.

Another concerning headline this morning is the amount of forbearance plans that are being extended. There were 200k plans that were set to expire at the end of November with another 1m set to expire at the end of December according to Black Knight. If you look at all forbearance plans since March, over 80% of them are extended at least once. This is a concerning amount of plans expiring at the same time that we are experiencing a declining jobs market.

Mortgage backed securities are down this morning in response to more disappointing job news. We are holding a locking bias as we continue to fall without a tested a floor of support in sight.