Once again, it’s time for the high flying jobs report.  Market expectations are as follows;

1)      Nonfarm Payrolls – Plus 513K

2)      Private Payrolls – Plus 190K (less census workers)

3)      Unemployment Rate – 9.8%

4)      Hourly Earnings – plus .1

5)      Average Hourly Workweek – 34.1 hours

Handicapping the May report has been tough.  The problem lies in just how many census workers were hired in May.  April hiring’s totaled 66K out of total jobs growth of 290K.  This month, analysts are looking for 323K, a number which we feel is understated given a couple of reliable reports already on the street.  Manufacturing surveys have been mixed, leading us to believe that any growth in this sector will be minimal.  Construction may have had a better month in adding to the payrolls but continuing that pattern as the year rolls on is somewhat in question.  Private sector services jobs may be the bright spot, adding about 200K in May.  Total it all up and we see an eye popping 600K Nonfarm Payroll number.

We also estimate that the census portion (new hires for temporary assignment) is 450K, making the net Private sector jobs growth print to be 150K.  ADP estimates for the private sector came in at plus 75K and as I mentioned earlier, the “street” consensus is at plus 190K.  Market reaction to the numbers will depend on how traders interpret the numbers.  High census worker gains will not blow up the bond market.  That number is an immediate subtraction.  The drill down number will be all about Private sector growth.  100K to 200k will not move the market much.  We believe that a print of 250K or more is needed to send yields to higher levels.  No one is looking for Private growth to be under 100K, except for ADP.  The unemployment number is another story.  We see census driven hiring to begin outpacing labor force entry, pulling the rate down to 9.7%.  The street is looking for 9.8%.  The improvement in this number could be the one that starts traders selling.

With yields near record lows and mortgage pricing at or near the best levels in some time, its fool’s gold not to lock in your Austin mortgage rates. If traders jump the sell side, we see the trade to be shallow, say .50 bps worsening to mortgage pricing as cross currents from around the globe will still be there to support fixed income products.  So what are others saying;

1)      Nomura – 425K at 9.7%

2)      Wells Fargo – 511K at 9.8%

3)      JP Morgan – 545K at 9.7%

4)      CIBC – 600k at 9.7%

5)      RBS – 625K at 9.8%

Looks like they have some smart dudes at CIBC.  Buckle up, the ride starts at 7:30 am cst tomorrow morning.