Commentary: Nonfarm payrolls grew by 117,000 jobs in July according to Labor Department data. In the same report, the headcount for May and June was revised to show 56,000 more jobs were added than previously reported. The unemployment rate dipped to 9.1% from 9.2% in June - most likely because more than 190,000 prospective workers became so discouraged they simply quit looking for employment. The national jobless rate has now remained above 8.0% for 30 straight months, the longest stretch of high unemployment since the Great Depression.
While the July nonfarm payroll report exceeded most economists' expectations for headline job growth of 90,000 - it is still not strong enough to even cover the natural monthly increase in the labor force, which requires a minimum of 125,000 new jobs. It will take several consecutive months of headline payroll gains of 100,000+ to make a convincing case that the labor market has begun a sustained recovery.
Today's swoon in the mortgage market is probably far more the result of an unwinding of yesterday's "flight-to-quality" buying spree created by a 500+ point drop in the Dow Jones Industrial Average -- than it is a reaction by investors to this morning's slightly stronger than expected July nonfarm payroll report.
I am watching trading action in the stock markets closely. My models are suggesting the Dow Jones Industrial Average is attempting to build a bottom to support an "up" move to higher prices. If my assessment proves accurate - the "flight-to-quality" flow of capital out of stocks and into the relative safe haven of Treasury debt obligations and mortgage-backed securities will continue to tapper off rather quickly -- an event likely to bring the recent rally to notably lower interest rates to a abrupt end as well. In my judgment the threat of a stock market rally will dissipate should the Dow Jones Industrial Average fall and close below the 11,200 level and/or a meaningful rally for stocks has not developed before next week Friday.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
