Once again it is time for the high profile Employment Report for October. The report completes what I’ve called the ‘trifecta” for this week. One that has been market moving due to Mid-term elections, FOMC meeting and policy statement, and tomorrow at 7:30 am cst, the Employment report. Market expectations are as follows;
1) Non-Farm Payrolls – Plus 60K
2) Private Payrolls – Plus 75K
3) Unemployment Rate – 9.6%
4) Hourly Earnings – Plus .1
5) Average Workweek – 34.2 hours
Our bias for tomorrow’s release is for slightly better numbers that market consensus. We feel that Non-farm payroll figures will post the first positive reading since May at plus 75K. Our “guess” is predicated on better ISM Manufacturing Survey employment figures, census worker fluctuations being a thing of the past, a pickup in construction jobs due to better housing starts, and private sector employment continuing to add new workers.
Using one standard deviation, the print should come in between a positive 83k and positive 37K. More than 100K and less than 25k would be considered “outliers” and definitely move the market. We like the unemployment rate to be unchanged at 9.6% but would not be surprised to see 9.5%. We agree with market consensus on Hourly Earnings and Average Work week projections. What are others saying?
1) Wells Fargo – Plus 29K at 9.6%
2) Barclays – Plus 60K at 9.6%
3) UBS – Plus 70K at 9.6%
4) RBS – Plus 75K at 9.6% (We think they have it right)
5) JPMorgan – Plus 110K at 9.6%
Market reaction favors steady to slightly worsening Austin mortgage pricing. With the rally over the past few days, risk reward in not in your favor, Austin mortgage borrowers, unless the print reflects negative jobs growth. At the same time, the Bernanke trade is still the game and will continue to support bond and mortgage pricing for as far as the eye can see. Just the same, this report creates so much volatility that it is best to lock your interest rates now. Hard to lose when you use PrimeLending’s world-famous float down option!
Better to be a live dog than a dead lion!