May Strong for the Labor Market 6-1-18

Mortgage bond prices are lower this morning after a strong employment report was released from the Bureau of Labor Statistics (BLS).  The report showed that there were 223,000 new jobs created in the month of May, which was more than the 190,000 the market had anticipated.  In addition, the Unemployment Rate component of the report dropped from 3.9% to 3.8%, which is the lowest level we have seen in 10 years.  Looking back to the last time we saw such low levels was just before the labor market faced a massive shift that led to 17,000,000 Americans looking for work.  Generally speaking, really strong cycles (such as what we are now experiencing) are followed by difficult times.  I can say that will eventually happen, I just can’t accurately predict when.

This morning it was announced that a representative from North Korea is hand delivering a letter directly to President Trump. Most assume this is an attempt to reconcile and reestablish a commitment for the leaders of each country to meet. If that does in fact happen, we could see investors feel more comfortable with pushing stock prices higher. That could hurt bond prices further.

Bond prices are currently sharply lower on the BLS Report. We will maintain our locking bias.

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