February 3, 2023 – Economic News

• February 3, 2023
• realestate
• Business & Markets, Fed, Interest Rates, Politics & Economy, Rates, Real Estate, Real Estate Finance, Recession, World News, Your Real Estate Life

MBS OVERVIEW

4:00 EST – Our benchmark FNMA MBS 6.00 February Coupon is down -16 BPS with 60 minutes left to trade.

Jobs, Jobs, Jobs: Its Big Jobs Friday, and we certainly got much stronger than expected “data” from the BLS.You can read their official release here. Here is the Tale of the Tape:

Jobs:

January Non Farm Payrolls (NFP) were much ghigher than expected, up 517K vs est of 185K

December NFP were revised upward from 223K to 260K

November NFP were revised upward from 256K to 290K

The rolling three month average has shot up to 356K

However, there is a big asterisk on the 517K. This number is seasonally adjusted. The Non-seasonally adjusted number is a loss of -2.505 million jobs. This means that the seasonal adjustment was over 3M jobs. This is the largest singular seasonal adjustment ever on record.

Wages:

The national Average Hourly Earnings rate rose by 10 cents to $33.03 per hour

MOM Average Hourly Earnings were up 0.3% which matched expectations, December was revised higher from 0.3% to 0.4%

YOY Average Hourly Earnings were up 4.4% which is lower than December’s pace of 4.9%

Unemployment:

The headline Unemployment Rate dropped from 3.5% to 3.4%, the market was expecting a rise to 3.6%.

The U6 Underemployment Rate ticked up from 6.5% to 6.6%.

The Labor Force Participation Rate increased from 62.3% to 62.4%

Services: the January national ISM Services PMI which accounts for 2/3 of our economic engine was stronger than expected with an expansionary reading of 55.2 vs est of 50.4 and is a nice reversal from December’s contractionary pace of 49.4. New Orders jumped from 45.2 to 60.4.

I don’t believe the increase in Jan jobs (517K), the estimates do have aberrations, but jobs expected up 185K is well off but this much is not a rational deviance . The unemployment rate the lowest in 53 years. Private jobs +443K against forecasts of 170K. On Wednesday ADP reported Jan private jobs at 106K against 185K estimates. Both ADP and BLS use the same week in the month to calculate jobs and unemployment, this round the week was Jan12th, how can this make much sense? That said, presently (today) the markets took it at face value. Stepping back, the 10 still hugging 3.40% and any increase will find support at 3.60%. This week had a lot of meat, FOMC, employment, rate hikes in Europe, Q4 employment cost index, consumer confidence, JOLTS job openings. The report this morning has to trouble the Fed, assuming the Fed believes the employment report.

Earlier this week markets were circling around a 25 bp increase at the March FOMC meeting, then stopping, after the report this morning. The swap markets upped the bet that the May meeting that was expected with no increase now thinking another 25 bp increase in May. Jerome Powell commenting at his press conference no rate cuts this year.

The dollar was hit hard today on the belief the Fed will increase rates more than was thought yesterday and the couple of weeks.

Next week doesn’t have much data but there is one stand out, on Tuesday Jerome Powell scheduled to address the NY Economic Club, after the strong employment report this morning how will be frame it? Tuesday Dec trade deficit, Dec consumer credit, 3 year note auction. Wednesday weekly MBA mortgage applications, Dec wholesale inventories, 10 year note auction (new issue). Thursday weekly jobless claims, 30 year bond auction (new). Friday U. of Michigan consumer sentiment index.

This week after all the angst through the week the week had no changes in rates from last Friday. 10 year note this week up just 2 bps, MBS prices -23 bps. The DJIA -52, NASDAQ +385, S&P +65. Gold this week -$51.00, crude oil -$6.16. The dollar index increased 1.06 on employment data. Bitcoin this week +65.