Commentary: Employment ground to a halt in August as sagging confidence caused already skittish businesses to refrain from posting their "Now Hiring" signs.
For the first-time since 1947 the headline nonfarm payroll number posted a goose-egg. According to the Labor Department, nonfarm payrolls were unchanged last month - with new job creation matched exactly by job losses. The national jobless rate remained at 9.1%. The statistical anomaly for the headline jobs number is sure to be revised away next month -- but any adjustment will not change the single truth that labor market conditions are dismal. As it stands now, the economy needs to generate 150,000 jobs or so each month just to keep pace with the number of new job seekers entering the labor market.
Based on today's ugly nonfarm payroll report there are many calling for the Fed to immediately launch another stimulus plan. Others question whether another round of intervention by the Fed would really do much in the way of inducing businesses to hire additional workers.
With liquidity in the banking system and on corporate balance sheets at the best levels in decades it seems to me that injecting additional liquidity won't likely do much to induce job creation. The current crisis is no longer a function of liquidity - but rather it is largely a crisis of confidence - and that is a condition that is much more difficult to resolve since it requires strong leadership at a number of different levels of government, business, and society-at-large. America has a solid history of leaders appearing at just the right moment to guide the country through its most troubling times. If history is going to repeat itself - I believe now would certainly be an opportune time for those leaders to make their presence known.
Looking ahead to next week's holiday shortened scheduled the economic calendar is sparse -- with nothing more than Tuesday's Institute of Supply Management Service Sector Index to capture mortgage investors' attention. This report is expected to do little more than confirm other previously released data indicating economic growth almost ground to a halt last month - a condition that is already well priced into most of your investors' rate sheets.
At some point - from the investors' perspective - accepting lower yields on their mortgage portfolio becomes pointless - or dangerous - or both. Against this background it will not take much in the way of an inflation spike or signs of even slightly improving economic conditions to prompt a dramatic upward surge in note rates. A word to the wise.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
