Unemployment to increase in the future

Is the jobs market improving?  We wouldn’t go so far as to say that, but layoffs did dip a little last week.  Weekly jobless claims, which had been over 320,000 for the last four weeks, receded to 317,000 for last week.  The four-week average is up to 329,750, and with certain costs of doing business rising the way they are (oil in particular), many more layoffs may be in companies’ futures.

Same store sales in October were weak, and although the holiday shopping normally doesn’t get into full swing until November, there are obvious negative implications for the data.  Consumers are holding their money tighter to the vest as they’ve seen their home’s equity decline and gas prices rise.

Bernanke reaffirmed what everyone has already been worrying about.  He provided his testimony before the Joint Economic Committee to congress this morning.  Amazingly, he wrote off the recent strong GDP numbers, saying that growth is likely to slow dramatically due to continuing credit issues and increasing mortgage defaults.  Despite his past insistence that the housing market problems are contained and that it is not the job of the Fed to bailout the credit or financial markets, he cited these two areas numerous times in his testimony.  The Fed is watching these sectors, whether they want to admit it or not.  The fact that they still have significant doubts and concerns about the markets implies that they are going to do what they can to lighten the blows.

MBS prices are starting to catch up with the gains in Treasuries.  The FNMA 30-year 6.0% is up 3bp to 100.59, but it is below the previous support (now a resistance) of 100.62.  Price have close below this level the past two days, so there is growing resistance at this level.  There has been support at 100.52 (25-day moving average), so prices are caught in a tight range right now.  The stochastics are well out of overbought territory, so prices have flexibility to move either way at this time.

The 10-year Treasury yield slid lower yesterday after the stock market plunged 360 points.  The yield is trading just under 4.30%, but this threshold has put up a strong wall of support so far.  Unlike MBS, Treasuries remain deep in overbought territory, so there is greater potential for the yield to rise in the short-term.