Currently the Dow is up 72 and mortgage bonds are down 47 basis points, bringing rates up by about .125% following the better-than-expected Bureau of Labor Statistics jobs report showing 67,000 new private sector jobs in August, positive revisions for July, and 763,000 new private sector jobs in 2010. Commentary and charts below.

The BLS report showed that the economy lost 54,000 non-farm jobs in August which reflects the fact that 114,000 government census workers have now completed their work. Actual new private sector jobs were 67,000 for August and 763,000 for 2010. Estimates called for a loss of 120,000 non-farm payrolls, much more than the actual 54,000 loss, and this disparity is why the market reaction is good for stocks and bad for rates. BLS also reported that 14.9 million people are unemployed. This is a 9.6% unemployment rate, up 4.7% since the recession began in December 2007. See charts and more commentary on the U.S.’s 8.9m involuntary part-timer workers below.

Additionally there are now 8.9 million people who would like to work full time but are working part time because their hours have been cut or they can’t find full-time jobs. This forced-into-part-time-work category is up 4m million since January 2008. This is the fine print of the jobs report—the headline job loss and unemployment statistics show that these 8.9 million people are employed and therefore not in the job loss category, but because of their job status these 8.9 million workers aren’t likely to be consuming at normal levels. This poor statistic in the jobs report is mostly unreported, but until there’s movement here, a sustained recovery will be elusive.

CHART 1: PRIVATE SECTOR JOB GAIN/LOSS DEC 2007 TO AUGUST 2010

CHART 2: AUGUST 2010 JOBS BY SECTOR

CHART 3: JOB LEVELS JANUARY 2000 TO AUGUST 2010

Currently the Dow is down 120, S&P is down 15, and mortgage bonds are up 25 basis points, bringing rates down by about .125% following the Bureau of Labor Statistics report showing only 71k private payrolls were added to the U.S. economy in July, and June was revised down 100k. Additional commentary and charts below.

The BLS non-farm payroll report showed that the economy lost 131,000 jobs in July which reflects the fact that 143,000 government census workers have now completed their work. Actual new private sector jobs were 71,000 for July and 630,000 for 2010, most of which was in March and April. Estimates called for 87k total jobs lost (instead of 131k), and this disparity is why the market reaction is bad for stocks and good for rates. BLS also reported that 14.6 million people are unemployed. This is a 9.5% unemployment rate, up 4.6% since the recession began in December 2007. See charts and more commentary on the U.S.’s 8.5m involuntary part-timer workers below.

Additionally there are now 8.5 million people who would like to work full time but are working part time because their hours have been cut or they can’t find full-time jobs. This forced-into-part-time-work category is up 3.6m million since January 2008. This number decreased 623k since April. This is the fine print of the jobs report—the headline job loss and unemployment statistics show that these 8.5 million people are employed and therefore not in the job loss category, but because of their job status these 8.5 million workers aren’t likely to be consuming at normal levels. This poor statistic in the jobs report is mostly unreported, but until there’s movement here, a sustained recovery seems hard to achieve.

CHART 1: PRIVATE SECTOR JOB GAIN/LOSS DEC 2007 TO JULY 2010

CHART 2: JULY 2010 JOBS BY SECTOR

CHART 3: JOB LEVELS JANUARY 2000 TO JULY 2010

Rates have dropped to new record lows twice in the last month, with the most recent record rate lows coming between June 23 and July 1. And despite the June jobs report today showing the biggest monthly job losses in 2010, rates couldn’t break any lower. The Bureau of Labor Statistics non-farm payroll report showed that the economy lost 125,000 jobs in June which includes a 225,000 reduction in the Census workforce (which count as full-time jobs on BLS rolls despite their temporary status). But 83,000 new private sector jobs were created, and this somewhat positive figure is a big reason rates didn’t drop further today—the other big reason is that mortgage bonds are trading at overpriced levels and it seems improbably they’d rally any higher (which would bring rates lower). The net job loss toll since the recession began in December 2007 at 7.48 million, but 2010 shows a net job gain of 882,000. BLS also reported that 14.6 million people are unemployed. This is a 9.5% unemployment rate, up 4.6% since the recession began in December 2007. See charts and additional commentary on the U.S.’s 8.6m involuntary part-timer workers below.

Additionally there are now 8.6 million people who would like to work full time but are working part time because their hours have been cut or they can’t find full-time jobs. This forced-into-part-time-work category is up 3.7m million since January 2008, and while it has improved in the last two months, it’s a volatile number. It decreased 900k in January (at the time, it was the first decrease in nine months), then increased by 800k in the two months before April, was flat in April, and decreased by 525k in May and June. This is the fine print of the jobs report—the headline job loss and unemployment statistics show that these 8.6 million people are employed and therefore not in the job loss category, but because of their job status these 8.6 million workers aren’t likely to be consuming at normal levels. This poor statistic in the jobs report is mostly unreported and trading decisions don’t seem to be made on this figure. But until there’s movement here, a sustained recovery seems hard to achieve.
CHART 1: MONTHLY JOB GAIN/LOSS DECEMBER 2007 TO JUNE 2010

CHART 2: JUNE 2010 JOBS BY SECTOR

CHART 3: JOB LEVELS JANUARY 2000 TO JUNE 2010

Currently the Dow is down 225, S&P is down 25, and mortgage bonds are up 59 basis points, bringing rates down by about .125% (and perhaps more if this mortgage bond rally holds) on two factors: (1) Hungary is the latest EU country to announce that their economy is in a very grave situation, and a mass selloff in their bonds again has benefitted U.S. Treasury and mortgage bonds; and (2) The Bureau of Labor Statistics reported that only 41k private payrolls were added to the U.S. economy in May, and expectations were significantly higher. More on the jobs report below.

The Bureau of Labor Statistics non-farm payroll report showed that the economy added 431,000 jobs in May which reflects 411,000 temporary hires of Census workers. Actual new private sector jobs were 41,000. In the Jobs By Sector chart below, you can clearly see the overwhelming weight that the temporary hires had on this month’s jobs report. Estimates called for 500k total jobs added and far fewer Census workers, and this disparity is why the market reaction is bad for stocks and good for rates. The net job loss toll since the recession began in December 2007 at 7.31 million, but April’s mostly private sector gain of 290k jobs wasn’t subject to revision this month, and 2010 is still positing gains instead of the mass losses of the past 2 years. BLS also reported that 15 million people are unemployed. This is a 9.7% unemployment rate, up 4.8% since the recession began in December 2007. See charts and additional commentary on the U.S.’s 8.8m involuntary part-timer workers below.

Additionally there are now 8.8 million people who would like to work full time but are working part time because their hours have been cut or they can’t find full-time jobs. This forced-into-part-time-work category is up 3.9m million since January 2008. It decreased 900k in January (at the time, it was the first decrease in nine months), then increased by 800k in the two months before April, was flat in April, and decreased by 343k in May. This is the fine print of the jobs report—the headline job loss and unemployment statistics show that these 8.8 million people are employed and therefore not in the job loss category, but because of their job status these 8.8 million workers aren’t likely to be consuming at normal levels. This poor statistic in the jobs report is mostly unreported and trading decisions don’t seem to be made on this figure. But until there’s movement here, a sustained recovery seems hard to achieve.
CHART 1: MONTHLY JOB GAIN/LOSS DECEMBER 2007 TO MAY 2010

CHART 2: MAY 2010 JOBS BY SECTOR

CHART 3: JOB LEVELS JANUARY 2000 TO MAY 2010

Survey: Which Lenders Are Most Profitable
With all of the talk in the past two years about owning a bank or not owning a bank, it is interesting to keep in mind some recent findings of the semi-annual MBA/STRATMOR Peer Group Survey. The study divided mid-level retail mortgage originators into two groups, one owned by banks and the other independent mortgage bankers. Most every mortgage bank had a grand year in 2009, but the study found that bank-owned lenders were the top earners by a rather large margin due to lower expense levels and higher net interest spreads. The next profitable group, earning a margin 20% less than their bank-owned brethren, was net branch lenders. This group actually saw higher revenues, but had the highest expense levels. Standard branch independents came in third, about 20% less in profits than net branch lenders.

The MBA/STRATMOR study raises some interesting questions, fine for me to raise but far above my pay-grade to answer. Can the bank-owned lenders sustain their cost advantage in 2010 with lower industry volumes? Is some of this cost advantage due to the bank exemption from state and LO licensing requirements, and if so will it continue under consumer protection legislation? Do these results validate the net branch business model in comparison to the corporate branch model? And, if the mortgage industry ever has a “normal” year, will standard branch lenders fare relatively better or worse?

Anyone interested in learning more about the study can visit the MBA/STRATMOR website.

Treasuries Highest In 2 Weeks
What difference does it make that after the commentary went out yesterday, the market saw Factory Orders come out at +1.2%, lower than expected? Or that the ISM Non-Manufacturing Index was steady at 55.5 for May – still expansionary. Yesterday the decent news pushed the 10-year note’s yield to its highest level in two weeks, and mortgage selling really picked up yesterday, especially while the Treasury market was rallying. Traders estimate about $1.5 billion of new production came through their phone lines, but buyers were waiting and mortgage prices did well relative to Treasury prices. Not that this impacts current-coupon originators, but 5.5%-6.5% MBS’s hit record high prices of 107, 108, and 109! Where’s the prepay risk?

Is Census Cooking Books On Job Count?
Everyone seemed to think that Nonfarm Payrolls were going to increase significantly. Census hiring, a big wild card in this government-sponsored era, has fallen way below the bureau’s original estimate of 700-800,000 jobs, and is probably less than 200,000. But even the Census Bureau numbers have been called into question lately. The New York Post reports that although this hiring has been decent over the last few months, the Labor Department

“doesn’t check the Census hiring figure or whether the jobs are actually new or recycled. It considers a new job to have been created if someone is hired to work at least one hour a month. One hour! A month! So, if a worker is terminated after only one hour and another is hired in her place, then a second new job can apparently be reported.”

Poor Jobs Report
Non-Farm Payrolls were up 431,000, but the private sector was up only 41,000. In fact, the census workers accounted for 411,000. Although there were March and April revisions, this is a weak number, and stock market numbers plunged on the news. The unemployment rate fell to 9.7% from 9.9% – certain to make the headlines tomorrow. Hourly Earnings were up 0.3%. A jobless recovery anyone? The 10-yr. is down to 3.24% after being above 3.40% yesterday and 30-yr mortgage prices are better by around .5. Yesterday not only did rates go up, but the stock market fell as well. What a difference a day makes, as today we are seeing stocks tumble after a weak jobs number, but fixed-income prices improve nicely. You can read all the flowery language you want, but it boils down to a poor job market continuing to show that our economy is sluggish, leading to a lower stock market and continued lower rates.

Daily Humor
(As always, the joke does not necessarily reflect the view of the author.)

A woman, married three times, walked into a bridal shop one day and told the sales clerk that she was looking for a wedding gown for her fourth wedding.

“Of course, madam,” replied the sales clerk, “exactly what type and color are you looking for?”
The bride to be said: “A long frilly white dress with a veil.”

The sales clerk hesitated a bit, then said, “Please don’t take this the wrong way, but gowns of that nature are considered more appropriate for brides who are being married the first time – for
those who are a bit more innocent, if you know what I mean. Perhaps ivory or sky blue would be nice?”

“Well,” replied the customer, a little peeved at the clerk’s directness, “I can assure you that a white gown would be quite appropriate. Believe it or not, despite all my marriages, I remain as
innocent as a first time bride. You see, my first husband was so excited about our wedding; he died as we were checking into our hotel. My second husband and I got into such a terrible fight in the limo on our way to our honeymoon that we had that wedding annulled immediately and
never spoke to each other again.”

“What about your third husband?” asked the sales clerk.

“That one was a Democrat,” said the woman, “and every night for four years, he just sat on the edge of the bed and told me how good it was going to be, but nothing ever happened.”

The unemployment rate was 4.8% in December 2007 when the recession was declared official, and as of the April 2010 jobs report on Friday, it was 9.9%. We did have the best monthly gain in jobs in four years on the April report with +290k jobs (or +224k ex-Census workers), but we’ve lost 7.72m jobs since the recession began. Need a string of April-like numbers to sustain a recovery. You can hover over chart below to see official BLS-reported unemployment rates for each month in this series beginning in 1990. The link above will take you to the most recent data from last Friday.

The Bureau of Labor Statistics non-farm payroll report showed that the economy added 290,000 private sector jobs in April. The job loss toll since the recession began in December 2007 at 7.72 million, but this is the biggest monthly gain in four years, and the U.S. has added 573k jobs since January. Bond markets that rates are tied to were up as much as 34 basis points earlier today (continuing yesterday’s reaction to European debt woes) and are now down about 25bps (a reaction more in line with this better economic news)—wild volatility continues. For now, rates are about net even after yesterday’s gains. BLS also reported that 15.3 million people are unemployed. This is a 9.9% unemployment rate, up 5% since the recession began in December 2007. See charts and additional commentary on the U.S.’s 9.2m involuntary part-timer workers below.

Additionally there are now 9.2 million people who would like to work full time but are working part time because their hours have been cut or they can’t find full-time jobs. This forced-into-part-time-work category is up 4.3m million since January 2008. It decreased 900k in January (at the time, it was the first decrease in nine months), then increased by 800k in the two months before April, then was flat in April. This is the fine print of the jobs report—the headline job loss and unemployment statistics show that these 9.2 million people are employed and therefore not in the job loss category, but because of their job status these 9.2 million workers aren’t likely to be consuming at normal levels. This poor statistic in the jobs report is mostly unreported and trading decisions don’t seem to be made on this figure. But until there’s movement here, a sustained recovery seems hard to achieve.
CHART 1: MONTHLY JOB GAIN/LOSS DECEMBER 2007 TO APRIL 2010

CHART 2: APRIL 2010 JOBS BY SECTOR

CHART 3: JOB LEVELS JANUARY 2000 TO APRIL 2010

Today, ADP, a provider of payroll services to 22 million Americans employed in the private sector, released their monthly jobs data which showed that the economy gained 32k jobs in April; these numbers don’t include 2010 Census hiring. Expectations called for a gain of 30k jobs, and bond markets initially rallied on the news, pushing rates slightly lower. But as the trading day has continued, bonds have reversed and rates are now net even from yesterday—it’s still been a favorable week for mortgage bonds and rates because investors have sought safety of mortgage (and Treasury) bonds as the European debt crisis has played out. The market sentiment is holding that Friday’s official BLS jobs report will come in with about 175k-190k jobs gained, and this number will include Census hiring. This improving economic sentiment would cause bonds to sell off, which pushes rates higher.

You can view previous months of both reports by clicking the ADP and BLS tags below, and you can also scroll to our data section to review current and historical jobs data. Additional ADP April Jobs Report Data is below…

The estimated change in the ADP employment report from February to March 2010 was revised up, from a decline of 23,000 to an increase of 19,000. Also the revised estimate of the monthly change in employment from January to February 2010 shows a modest increase of 3,000. Thus, employment has increased for three straight months, albeit only modestly.

April’s ADP Report estimates nonfarm private employment in the service-providing sector rose by 50,000, the third consecutive monthly increase. Employment in the goods-producing sector declined 18,000 during April. However, while construction employment dropped 49,000, manufacturing employment, in an encouraging sign, rose 29,000, the third consecutive monthly increase.

Large businesses, defined as those with 500 or more workers, saw employment increase by 14,000 and employment among medium-size businesses, defined as those with between 50 and 499 workers increased by 17,000. Employment among small-size businesses, defined as those with fewer than 50 workers, increased by 1,000 in April.*

In April, construction employment dropped 49,000. This was moderately higher than last month’s decline of 38,000. This was the thirty-ninth consecutive monthly decline, and brings the total decline in construction jobs since the peak in January 2007 to 2,159,000. Employment in the financial services sector dropped 14,000, resulting in over three years of consecutive monthly declines.

The Bureau of Labor Statistics non-farm payroll report showed that the economy added 162,000 private sector jobs in March. Twenty-four of the last 28 months have shown losses, putting the job loss toll since the recession began in December 2007 at 8.131 million. But this is the biggest monthly gain in three years. Bond markets that rates are tied to are selling off wildly today since the Federal government only hired 48k workers for Census instead of about 75k expected—these temporary workers are counted on this jobs report. The result is that rates are higher by about .25%. BLS also reported that 15 million people are unemployed. This is a 9.7% unemployment rate, up 4.8% since the recession began in December 2007. See charts and additional commentary on the U.S.’s 9.1m involuntary part-timer workers below.

Additionally there are now 9.1 million people who would like to work full time but are working part time because their hours have been cut or they can’t find full-time jobs. This forced-into-part-time-work category is up 4.4m million since January 2008, and increased by 300k this month and 500k last month, offsetting a big drop in January. January’s drop from 9.2m to 8.3m was the first improvement in nine months. This is the fine print of the jobs report—the headline job loss and unemployment statistics show that these 9.1 million people are employed and therefore not in the job loss category, but because of their job status these 9.1 million workers aren’t likely to be consuming at normal levels. This poor statistic in the jobs report is mostly unreported and certainly no trading decisions are being made on it so far today.
CHART 1: MONTHLY JOB GAIN/LOSS JANUARY 2008 TO MARCH 2010

CHART 2: MARCH 2010 JOBS BY SECTOR

CHART 3: JOB LEVELS JANUARY 2000 TO MARCH 2010

Today, ADP, a provider of payroll services to 22 million Americans employed in the private sector, released their monthly jobs data which showed that the economy lost -23k jobs in March, but these numbers don’t include 2010 Census hiring. Expectations called for a gain of 40k jobs, and bond markets initially rallied on the news, pushing rates slightly lower. But as the trading day has continued, bonds have reversed and rates are worse. The market sentiment is holding that Friday’s official BLS jobs report will come in with about 185k jobs gained, and this number will include Census hiring. This improving economic sentiment causes bonds to sell off, which pushes rates higher.

You can view previous months of both reports by clicking the ADP and BLS tags below, and you can also scroll to our data section to review current and historical jobs data. Additional ADP March Jobs Report Data is below:

March’s ADP Report estimates nonfarm private employment in the service-providing sector increased by 28,000, the second consecutive monthly increase. However, this employment growth was not enough to offset job losses in both the manufacturing and construction sector. Employment in the goods-producing sector declined 51,000, with employment in the manufacturing sector declining by 9,000.

Large businesses, defined as those with 500 or more workers, saw employment decline by 7,000 while small-size businesses with fewer than 50 workers, declined 12,000. Employment among medium-size businesses, defined as those with between 50 and 499 workers, declined by 4,000.

In March, construction employment dropped 43,000. This was the smallest decline since July of 2008, but basically unchanged from the decline of 44,000 during February 2010. Employment in the financial services sector dropped 8,000.