UMBS were down 30 bps in the first hour of trading.

Nonfarm Payrolls = 353k vs 180k f’cast

last month revised to 333k from 216k

Unemployment Rate = 3.7 vs 3.8 f’cast

Earnings = 0.6 vs 0.3 f’cast   [0.4 prev]

Change in household employment -31k vs prior -683k

Healthcare and social assistance added 100k jobs. Professional / business services rose 74k. Manufacturing remained weak, adding only 28k jobs. Don’t forget there are all sorts of seasonal and demographic adjustments going on in this 353k number. If you look at the household survey data, there were 161.183 million people employed in December. In January there were 161,152 people employed, which means that the actual number of jobs fell by 31,000.

These results speak for themselves.  And while they’ll no doubt generate uninformed cries of foul play from the masses, these are the numbers BLS reported so that’s what the market is trading.

While existing home sales are very weak, home prices keep rising. The Case-Shiller National Index was up 5.1% Y-o-Y in November, up from 4.7% Y-o-Y in October. Similarly, the FHFA Index saw home prices rise 6.6% Y-o-Y in November, up from 6.3% in October. Moreover, the single-family mortgage seriously delinquent rate was just 0.55% in November, well below pre-pandemic lows and at rates last seen late in the Housing Boom.

Consumer sentiment improved in January, according to the University of Michigan Consumer Sentiment Survey. Importantly, consumers see inflation continuing to soften, with year-ahead inflation expectations falling to 2.9% from 3.1% in December and 4.5% in November.

Is Friday’s NFP number of 353k versus a 180k forecast “real?” Or is it some distortion created by the annual benchmark revision process?  Yes and no.  Smart, credible market participants don’t even entertain the notion of intentional manipulation. That said, they’re well aware of unavoidable distortions, and today’s payroll count qualifies.  That’s not to say the job gains weren’t “real,” but NFP overstated the resilience of the labor market.  That’s why yields are still much lower than they were last week.  Why are they so much higher than yesterday, then?  Partly because yesterday capped an aggressive snowball rally that was built on a shaky foundation.  The only truly solid foundation will be a sustained return to 2% inflation, and the only thing that would predispose traders to believe in that return any faster would be an obvious deterioration in the data.  At the ve

UMBS ended Friday down 38 bps, at 101.05.

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