Weekly Claims hit the tape down 11K to 445K, the first time since March we’ve been below the 450K mark. Continuing Claims fell 45K to 4.46 million as the employment picture is improving but ever so slightly. With today’s news out of the way, the focus will be to square up positions going into Big Daddy, the Employment Report for September.
Speaking of the report, I’ll give you our thoughts now as my afternoon is action packed. Consensus expectations are for zero jobs growth following last month’s lose of 54K. Meanwhile, the unemployment rate is expected to tick up to 9.7%. Our bias is for job losses of 20K and the rate to jump to 9.8%. This should be the last month of Census worker distortion, shedding about 70K from that sector. Government jobs look to be flat to a slight negative while manufacturing and construction dip as well. Service sector jobs should be a positive, bringing the overall number towards unchanged. We feel that even positive jobs growth (50K or less) will not start a new bearish trend in bonds (higher mortgage rates). Reason being is that the market is full of ready made buyers, looking to buy bonds and notes on any pullback. Call it QE fever.
Today’s trade is a little strange but then again, what day lately isn’t. Stocks have traded both sides of unchanged, currently down 25 on the big board. The 30 year bond is off 22/32’s as the yield curve steepens and yet the 10 year note is up 2/32’s. Mortgage backs are getting back a little of the widening spread that has hurt them lately, currently up 5/32’s.
Tactical bias is to be flat going into tomorrow’s number. That’s always a good thing, especially given the fact that we are at historic low yields and Austin mortgage rates. Better to be a live dog than a dead lion.