FNMA 30-YR 4.5%
Previous close 101.250
Opened down 0.12bp @ 101.125
Economic Data:
EUR / USD 1.3719 Down 0.0004
USD / JPY 89.545 Up 0.4900
GBP / USD 1.5702 Down 0.0053
OIL 73.46 Up 0.32
Gold 1,062.70 Down 0.30
Key Econominc News:
Payroll day, then consumer credit and a Fed speech…
8:30: Employment report for Dec…more moving parts make this one a hard call. The key issue: (1) how much hiring of temporary Census workers (a small positive, we think); (2) what impact from the weather (negative in our view as conditions were colder relative to seasonal norms in early January than in early December); (3) how much carry through to current trends from the benchmark revision (potentially negative, though unobservable for January); (4) does last year’s extremely week labor market set us up for a seasonal bounce in January (a potentially significant upside but with low probability, in our view).
Median forecast (of 85): +15k, ranging from -100k to +100k; last -85k.
The unemployment rate should not be affected by any of these factors except the Census hiring, which should be quite small(a tenth of a point in the unemployment rate is worth 150,000). We expect a small increase in unemployment with some risk of a higher figure if the labor force participation rises from an extremely low level. While that is a reasonable expectation as the labor market improves, we can’t be confident about when this will occur.
Median forecast (of 84): 10.0%, ranging from 9.8% to 10.3%; last 10.0%.
We continue to look for deceleration in wage inflation as the unemployment rate hovers at 10% and the broadest measure of underemployment is in the vercinity of 17%.
On average hourly earnings: Median forecast (of 57): +0.2%, ranging from -0.2% to +0.3%; last +0.2%.
15:00: Consumer credit for Dec…continued retrenchment? Until the last report, it appeared that the paydown in outstanding balances was moderating. However, November’s decline was the largest (on a percentage basis) since May 1980, when credit controls were in effect. With conditions gradually normalizing and consumers spending, it is a fair guess that we will see more evidence of moderation but, in our view, just that – a guess.
Median forecast (of 33): -$10bn, ranging from -$13bn to +$5bn; last -$17.5bn.The conference is at Washington University, in St. Louis, and the topic is “Monetary Policy amid Economic Turbulence.” Bullard is a voting member of the FOMC in 2010.
17:15: St. Louis Federal Reserve President James Bullard speaks at a monetary policy conference…
Advice:
A better report, on balance, despite payroll losses
A somewhat better-than-expected report as the household survey uncovers large job gains (though this survey had been weaker previously) and reports a sharp drop in unemployment while the payroll change is close to expectations. Hours worked head into Q1 on positive track, and wages rise more than expected, suggesting income gains. In the rear view mirror, benchmark revision finds 930,000 fewer jobs in March 2009, pulling payrolls below the previous recession trough.
Key Numbers:
Nonfarm payrolls -20k vs median forecast +15k.
Unemployment rate 9.7% vs median forecast 10.0%.
Average hourly earnings +0.3% (mom, +2.5% yoy) vs median forecast +0.2%.
With this mixed bag of news, a stronger dollar, Oil below $74 per barrel, and being that it’s a Friday. I would expect traders to close out open positions over the weekend.
I would lock today.
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