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July 7, 2011

Fundamentals 7/7: Rates Up On Better Jobs Data

July 7, 2011

Fundamentals 7/7: Rates Up On Better Jobs Data

The likely scenario for tomorrow’s BLS Report is “better than last month but still weak.” Equities rallied and mortgage and Treasuries sold on today’s ADP jobs report (below), pushing rates higher. To keep pace with population growth while keeping the employment participation level constant, 121,000 new jobs are needed each month. The fact that today’s June ADP number being just 36,000 above that is cause for a rally indicates just how bad the perception of the underlying jobs picture is. While this short-term perception isn’t as important for long-term investors, daily rate movement is driven by this short-term perception. All of today’s jobs stats below.

ADP Jobs vs. BLS Jobs

ADP Jobs Report & Jobless Claims
ADP June Jobs was +157k vs. +38k in May
-Lately, ADP has been a good forecast of the BLS Employment Situation Report (due tomorrow). There was a disconnect between the two in the first 9 months of last year. ADP is just private sector jobs. BLS is private and public and there is and will continue to be pressure to reduce public payrolls.

-Initial Jobless Claims 418,000 for week ended 7/2
-Down 14,000 from the previous week’s revised figure of 432,000
-4-week moving average was 424,750, down 3,000 from previous week
-Today’s data better but still above 400k for 13th consecutive week