Political motivation move job numbers

Friday, October 05, 2007

ECONOMIC DATA / NEWS

There was only one surprise from the jobs report.  That was a revision higher for August, which was originally reported at -4000.  However, this month’s report puts August payroll growth at +89,000.  Original estimates are rarely off by 100,000, but revisions of 15 – 30K are common.  So a revision like this brings up questions of political motivation.  Don’t be shocked if August’s number is subsequently revised dramatically lower next month.  Meanwhile, September’s payrolls came in at 110,000, which is essentially in line with the 100,000 that most economists were predicting.  The growth was coming from education and government jobs as we thought would be the case, but the report claims that those jobs were also the reason for the sharp revision in August payrolls.  We have our doubts, and with these education and government positions out of the way, the jobs number is likely to fall off again in October.  It is not much of a sign that we’re safe from a recession as some writers would have you believe.

The unemployment rate still ticked up from 4.6% to 4.7%.  It makes it that much more suspicious when unemployment, which is measured differently than payroll growth rises despite these “improved” jobs numbers.  The average workweek did not change at 33.8 hours and average hourly earnings were up a modest .4%.  Overall, September was still another relatively weak month for employment, but the mysterious revisions to August and even July were what caught traders’ attention.

TECHNICAL ANALYSIS

There was a delayed reaction to the data this morning, but the lemmings finally followed one another off the cliff.  The FNMA 30-year 6.0% plunged 28bp within a half hour of the data’s release.  The 10-day moving average at 100.18 has actually provided some support, and prices have landed with a thud on top of this line.  If prices sit here for a while, traders might actually be encouraged to buy, which could push prices up 9bp to 15bp from where they currently stand.

The reaction to the data in Treasuries was much more immediate.  The 10-year yield rose about 5bp right off the bat, and they are now up about 10bp from yesterday.  The yield is at 4.61%, but it is finding at least mild resistance from the 50-day moving average.  This level has held the yield lower for the last two and a half months, but the longer it acts as a resistance, the more vulnerable it becomes to an eventual break.  We’ll see if the upward move of panic wins out, or if this resistance level can live to fight another day and perhaps knock the yield back under 4.60%.

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