Daily Commentary by Larry Baer: There is really nothing new to report to you this
morning.
The number of
Americans filing new claims for unemployment benefits fell for a third straight
week, dropping back to their pre-Hurricane Sandy
levels. The data shows there has not been a notable weakening in the
labor market - nor has there been any substantial improvement. Most
analysts believe the underlying employment growth trend is probably running in
the neighborhood of 150,000 new jobs
per month - a pace just barely strong enough to keep the national jobless rate
from ticking higher.
Abstracting recent
weekly jobless claims reports into an estimate for tomorrow's headline November
nonfarm payroll report and making a reasonable adjustment for Hurricane Sandy
is, in my opinion, about as difficult as trying to stuff 10 pounds of potatoes
into a 5 pound bag -- something is sure to get left out - or to prove to be
just a little too much. In any case, the current data suggests a strong likelihood
the November nonfarm payroll figures will come in on the low side of the
consensus estimate calling for a gain of 100,000 new jobs and a jobless rate of
7.9%.
Normally a
softer-than-expected nonfarm payroll report is supportive of steady to slightly
lower mortgage interest rates. This time around mortgage investors will
likely show little reaction to the economic news as they remain fixated on all
the Congressional saber-rattling and political posturing surrounding the effort
to find a way down from the fiscal cliff. Nothing else matters -
macro-economic news has become little more than background noise.
An increasingly
large number of mortgage investors are moving to the sidelines in the absence
of progress on the fiscal cliff negotiations in Washington.
With the exception
of the government crew tasked with buying up to $40 billion per month of
agency-eligible mortgage-backed securities as part of the QE 3 initiative from
the Federal Reserve -- few other traders are active in the mortgage market - reducing
substantially the normal market reaction to economic reports.
A resolution of the
issue by Christmas, a week before the deadline, remains uncertain but not out
of the question. If/when a political compromise is reached to avoid the
"fiscal cliff" -- stocks will likely rally at the expense of rising
mortgage interest rates (as long as the deal is something more than a simple
extension of the current deadline). Until/unless a fiscal agreement is
achieved - a primary support for steady to perhaps fractionally lower mortgage
interest rates will remain firmly in place.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
