Float into the Labor Day Weekend

The estimate of new jobs created in the month of August was released this morning from the Bureau of Labor Statistics (BLS).  The report fell short of the markets’ expectations by 24,000.  According to the BLS, there were 151,000 new jobs created in the US economy last month.  Although not a terrible number, it is a sharp reduction from the prior month’s upwardly revised number of 275,000.  The Unemployment Rate was also worse than expected, coming in at 4.9%.  The consensus estimate for the Unemployment Rate was set at 4.8%.  The final key number in the report is Average Hourly Earnings, which showed an increase of just 0.1%.  A look at the year-over-year Average Hourly Earnings shows a decline from 2.6% growth down to 2.4%.  Overall, it was not a terrible report, just less than expectations and a bit disappointing. 

Mortgage bonds have bounced from the top of the channel down to the bottom, where it now rests.  The low report caused celebration in the US stock market, as this essentially ensures the Federal Reserve will hold off on increasing rates when they meet next in September.  This leaves November as the next possible rate hike, which will be after the presidential election.  More than likely, if there is to be a hike, it will be in the month of December as it was last year.  They generally don’t hike rates at meetings that don’t have a press conference afterwards.  Since there isn’t a press conference scheduled for the November meeting, this leaves December as the next concern for a hike. 

With a significant level of support just below current levels, we would like to continue to float into the Labor Day weekend.  However, if bonds happen to break below, we will quickly switch to a locking stance.