Daily Commentary by Larry Baer: Employers added a net 163,000 workers to the
national payroll in July. It was the
strongest month for job gains since February.
Revisions to the prior two month's headline number subtracted 6,000 workers
from the previously released headcount.
That is the good news. The bad news
is the national unemployment rate rose from 8.2% in June to 8.3% last month,
even as more people gave up the search for work. The unemployment rate has been stuck above
8.0% for more than three years, the longest run since the Great Depression.
Selling pressure in the mortgage market
reflects the initial knee-jerk reaction among some investors to this morning's
far stronger-than-expected headline employment number. While the sell-off must be respected, it is important
to bear-in-mind nonfarm payroll reports tend to be quirky this time of
year. I suspect calmer, cooler heads
largely anticipate the July pace of payroll growth with be very difficult to
sustain over the next few months. If my
assessment proves accurate, the selling pressure the mortgage market is
currently experiencing will abate significantly by next week Tuesday or
Wednesday. I'm not suggesting a rally
will ensue - I just see a number of reasons, both fundamental and technical, to
anticipate at least a leveling off from today's climb to higher rates will
probably occur in the earlier part of the coming week.
Uncle Sam will be conducting a three-part
Treasury auction during the middle three-days of the coming week. First up on the auction block will be a $32
billion stack of 3-year notes on Tuesday, followed by the sale of $24 billion
of 10-year notes and concluding on Thursday with a $16 billion bundle of
30-year bonds. All three offerings are
expected to draw strong enough demand that they will exert little, if any
influence on the current level of mortgage interest rates.
Wednesday's release of the government's first
"quesstimate" for Q2 Productivity and Unit Labor Cost joins
Thursday's initial weekly jobless claims and Wholesale Inventory numbers in a
lackluster macro-economic report schedule.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
