Floating Bias

The rally in the bond market is in full steam today, following a report from the Bureau of Labor Statistics (BLS) announcing that only 142,000 new jobs were created in the month of September.  This was far lower than the 203,000 the market anticipated and approximately 130,000 fewer than were created in the same month last year.  Adding to the weak job report were significant downward revisions to the prior two month’s reports – July’s figure was revised lower from 245,000 down to 223,000, and August’s figure, which was expected to be revised higher due to seasonal adjustments that month, were revised lower from 173,000 down to 136,000.  Combined, that adds up to nearly 60,000 in revisions to the downside.

The second part of the report comes from a Household Survey, where the Unemployment Rate is derived from.  It showed the Unemployment Rate remained steady at 5.1%.  However, this is largely due to a further decline in the Labor Force Participation Rate, which is now at lows not seen since 1977.  With fewer American’s working or looking for work, it artificially makes our economy appear stronger than it truly is.  Much of the decrease in people working is due to a massive increase in government dependence.  With more people living off the system and fewer paying into the system, this adds a significant drag on our economy and future prosperity as a country.

Bonds are now well above their 200 day moving average.  As long as the run continues, we will maintain our floating bias.  However, watch the markets closely.  Job report days are notorious for afternoon market reversals.  Be careful not to get burned.