Commentary: You better cut the pizza in four pieces because I'm not hungry enough to eat six. Yogi Berra
Evidently the great catcher with the New York Yankees baseball franchise is now doing some part-time number-crunching consulting work with the Labor Department. The government reported earlier this morning that headline employment grew by a meager 36,000 in January, far less than the 145,000 gain than was expected - yet the national jobless rate plunged to 9.0% from December's 9.4% level. The national jobless rate now stands at its lowest level since April 2009.
The data wonks at the Labor Department also revised November and December payrolls to show 40,000 more jobs than they previously had estimated were created during the two prior months. Oh yeah, these same statisticians finalized their annual benchmark revisions to the headline payroll figures, and said the level of employment from April 2009 to March 2010 was overstated by a 378,000 jobs.
According to Labor Department officials, the January employment story was multiple times better than it appeared on its face, and was simply distorted by severe winter weather that prevented 916,000 workers from doing their job during the period. If that rationale is indeed correct -- then it seems weather conditions must have also created a massive decline in the size of labor force -- which should also be considered when considering the stunning drop in the national jobless rate. Oh, my bad, I slipped into a little rational thinking there - and that's seems to be something government data wonks and media "talking heads" avoid at all times.
When confusion reigns, investors in general, and mortgage investors in particular, tend to take a "safe-rather-than-sorry" approach to their risk management strategies by selling any open positions and moving to the sidelines. Such is certainly the case today. The reality of a shockingly weak headline payroll number creating a surprisingly strong decline in the national jobless rate which in-turn produces sharply higher mortgage interest rates quite frankly falls outside of my ability to lucidly "connect-the-dots." Irrational events are.
Looking ahead to next week, Uncle Sam will be in the credit markets looking to borrow $72 billion in the form of $32 billion of 3-year notes on Tuesday, $24 billion of 10-year notes on Wednesday, and $16 billion of 30-year bonds on Thursday. Macro-economic news will be limited to Thursday's 8:30 a.m. ET initial weekly jobless claims report and the December Wholesale Inventory data at 10:00 a.m. ET the same day. In my judgment yields across the whole spectrum of the credit market have risen to high enough levels that the coming week's battery of Treasury debt auctions should draw decent demand. If so, these three events will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
