This morning, the October employment report produced some surprises. Most notably, the unemployment rate rose to 10.2%, well higher than expected, and its highest level since 1983.  We did hit the jobs number right on the head at190,000 job losses for the month, but August and September’s job losses were revised with 91,000 fewer lost. September numbers were revised to only being down 219k from the 263k previously reported.  August numbers were revised down 154k vs. the 201k previously reported.  Jobs were lost in most sectors of the economy, except for education, health, government, and professional sectors.  Payrolls rose by 45k in the education and health service sector and by 18k in the professional and business sector.  Government payrolls were unchanged.  Meanwhile, service-sector jobs, typically a major factor in job gains, fell by 61k and retail lost about 39k.  Construction lost 62k jobs while the manufacturing sector lost 61k jobs.  Average hourly earnings rose 0.3%.  Over the year, average hourly earnings rose 2.4%, while average weekly earnings rose by only 0.9% due to the decline in average work week.  For October, the average workweek was pretty much unchanged posting at 33.0 hours vs. the 33.1 hours economists were expecting.  Overall, the report shows that the employment situation remains depressed and economists are now saying that approximately 100k new jobs need to be created each month in order to meet the demand of new workers entering the market.

Since the recession began back in Dec 2007, 8.2 million new people joined the ranks of the unemployed.  While the 10.2 unemployment rate well exceeded expectations, its bond-bullish impact has now been erased.  Stocks, after having opened lower, now have rallied back up above the 10k mark.  The 10yr is currently off 3 ticks, trading 3.54 and mortgages unchanged.  A breakout below the 117-175 level or 118-285 upside will form a bias but until those levels are reached, we are right back into the same range we have been trading this week.  Currently we are hovering around 118-045.  I will add that most investors have probably priced a little rich to current levels.