May 3, 2012

Rates Hold On Better Jobless Claims, Worse ISM Services

May 3, 2012

Rates Hold On Better Jobless Claims, Worse ISM Services

Jobless claims were better today but ISM Services were worse. Rates are about even as mortgage bond (MBS) trading is just a small positive today—FNMA 3.5 coupon up 9 basis points.

Rundown of today’s data below. BLS Employment Situation Report is tomorrow. I think that expectations are so low that only something under +100,000 will rally MBS and Treasuries.

Initial Jobless Claims
– 365,000 for week ended April 28, seasonally adjusted

– Down 27,000 from previous week’s revised 392,000 (was 386k)

– 4-week moving average (also seasonally adjusted) was 383,500, up 750 from previous week

– This erases 5 weeks of higher than expected claims.

– While better than last week this is still not indicative of anything more than modest recovery. Yesterday’s ADP private jobs report for April offset whatever good is seen here.

– When the BLS Employment Situation Report comes out tomorrow, attention will be focused on jobs added and on the unemployment rate but the most important piece of data is the labor participation rate and than has been falling.

– Full jobless claims report from Department of Labor

– Here’s a chart from Bespoke

Challenger Job-Cut Report
– Announced layoffs 40,559. Previous was 37,880.

– This is a report of layoffs at large companies.

Non-farm Worker Productivity and Costs (1stQ2012)
– Nonfarm productivity, Quarter/Quarter -0.5%
– Unit labor costs, Quarter/Quarter +2.0%

– No one has a good explanation as to why worker productivity (GDP/hour worked) has declined. This should be a concern because increasing worker productivity is important to containing inflation.

ISM Non-Manufacturing Index (April 2012)
– Still shows growth but declined from 56.0 to 53.5

– 50 is dividing line between expansion and contraction

– This is a survey index which had four components: business activity, new orders, employment, and supplier deliveries.