Nonfarm Payrolls – Minus 363K

Unemployment Rate – 9.6%

Average Workweek – Unchanged

Average Hourly Earnings – Unchanged

Remember just one month ago. 4.875% was trading at a premium until the May Employment Report shocked the “street” with a minus 345K print (we were looking for minus 550K).  With the consensus call at 363K, we believe the market is set up for a much worse number.  ADP, although not reliable with an average miss of 113K, did predict a loss of 473K private sector jobs tomorrow.  Using only the weekly claims numbers that count in the monthly survey, we see an average job loss of 600K plus.

Continuing Claims have also continued to climb to uncomfortable levels, backing off only so slightly last week.  Based on claims and continued turmoil in the automotive sector, topped by stagnant housing numbers, we feel the number of Americans losing their jobs will come in at minus 450K.  Maybe even a touch higher.  The key to the report will be the Unemployment Rate which we expect to rise to 9.7%, a touch higher than consensus .

Many of the Wall Street firm are in our same neighborhood, looking for Nonfarm Payrolls to fall 500K plus.  Given any number over 400K, we would expect bonds and mortgage pricing to hold their own or rally slightly.  Given a number of 500K plus (losses), improvement in mortgage pricing of .50 bps would not be a surprise.  On the flip side, a print of 300K or less would put stocks on a stealth rally and quickly take the 10 year note towards 4.0%, punishing mortgage pricing in its wake.