As we suspected, the Bureau of Labor Statistics Jobs Report for the month of April came in higher than the market anticipated. While most were expecting a number around 185,000, the actual report showed that 211,000 new jobs were created. The Household Survey, from which the Unemployment Rate is derived, showed a net gain of 156,000 new jobs. At the same time, the labor force only increased by 12,000, which created a net drop of .1% in the Unemployment Rate. With the Unemployment Rate now at 4.4%, this is the lowest number reported in nearly 10 years. Overall, this was a strong job report. However, there has been little impact in the bond market, as it seems the market had already priced in the likelihood of the report coming in stronger than expected.
The Average Hourly Earnings report showed that Earning rose $.07 per hour to $26.19. This was a weaker component to the report which brings the year-over-year reading down from 2.7% to 2.5%. This shows that wage pressure inflation is moving lower, which seems counter intuitive given the low rate of Unemployment Rate. General economics would suggest that labor costs will rise as the job force tightens. If the trend of a tightening labor force continues, we can expect to see higher wages used as a tool to attract talent.
Bonds are in a tight channel and will likely be range-bound the rest of the day. Although there is not a driving force to lock at the moment, there is little opportunity for rates to see significant improvement. If you feel like taking the risk, you can float throughout the day and see what happens next week.