Once again, it’s time for the high profile jobs report.  Given the trouble that traders are having with this “not too hot, not too cold, or maybe just right economy,” handicapping this report, let alone our “Goldie Locks” market has been a challenge.  Market consensus for tomorrow’s print is as follows;

  1. Nonfarm Payrolls – Minus 320K (previous minus 467K)
  2. Unemployment Rate – 9.6% (previous 9.5%)
  3. Average Hourly Earnings – .1 (previous 0.0)
  4. Average Work Week – 33.0 (previous 33.0)

We see the jobs report coming in a touch weaker than consensus, calling for Nonfarm Payrolls to fall 350K and the Unemployment Rate to hit 9.7%.  Our bias is based on a smaller loss from the government (verses last month’s minus 67K), a mixed manufacturing sector which we estimate to have lost 100K, and Goods producing industries that have shed 145k jobs.  Service producers are a tough call as the sector have been volatile for months.  Still, we think that print is minus 170K.  Throw in a little job growth in the Health Care field along with the tail end of census tracking jobs hiring and the number comes in at 350K, give or take a little.  As we mentioned earlier, this one is a tough call, primarily due to job distortions and plant shut downs in the auto sector.  Here’s what others are saying;

  1. UBS – Minus 250K at 9.6%
  2. JP Morgan – Minus 275K at 9.7%
  3. Barclays – Minus 325K at 9.6%
  4. Scotia Capital – Minus 420K at 9.7%
  5. FT Advisors – Minus 190K at 9.6%

Given the wide spread between outliers (Minus 190K to Minus 420), the actual print should set the market up for stealth speed volatility.

How will it affect Austin mortgage pricing you ask? If the -420K or something close is the print, expect mortgage backs to get goosed higher, improving pricing for at least 50 to 75 bps.  If the -190k print is in vogue expect a “Katie bar the door” move to 4.0% on the 10 year note, punishing Austin mortgage pricing for 75 bps at a minimum.  Something around consensus probably would hurt our pricing for about 25 bps as stocks would move higher.  The thought here is -320K is only half as bad as -700K 6 months ago.  In other words, the economy must be getting better.  Trouble with that logic is that job losses of 350K is still a “loss” of 350K.  Not economically bullish in our opinion.  There is one kicker in the report.  Rumors have surfaced that back month revisions could show additional job losses of 1 million due to delayed reporting from unemployment offices across the country.  This would certainly be bond bullish and improve our pricing.  As always, it’s best to buckle up and put your hands in the 10 and 2 position.