Morning Report - Is the Millennial Generation really living in their parent's basement?

Vital Statistics:

	Last	Change	Percent
S&P Futures	1972.7	5.0	0.25%
Eurostoxx Index	3260.3	8.0	0.25%
Oil (WTI)	104.1	-0.4	-0.41%
LIBOR	0.232	-0.003	-1.07%
US Dollar Index (DXY)	80.23	0.270	0.34%
10 Year Govt Bond Yield	2.68%	0.05%
Current Coupon Ginnie Mae TBA	106.1	-0.2
Current Coupon Fannie Mae TBA	105.4	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.19

Markets are higher this morning after the jobs report. Bonds and MBS are getting hit hard

Since tomorrow markets are closed, we got two day's worth of data this morning. Stocks and bonds close early today, so I think people will get their positions squared away and then head for the beach.

The employment report came in  much stronger than expected, with 288,000 jobs created in the month of June (ADP was spot on for the second month in a row). The unemployment rate fell to 6.1%. The labor force participation rate did not budge, however and we are still stuck at Carter Administration lows. Average weekly hours were unchanged at 34.5 hours and average hourly earnings rose .2% month-over-month (or about 2% annually). 

In other data, initial jobless claims came in at 315k, the trade deficit narrowed to $44 billion, and announced job cuts fell 20%. 

Are half of all Millennials really living with their parents, as reported by Census? Of course the Great Recession has hit them hard. However, if you look in the footnotes of the Census report, you will realize that being away in college (or grad school) counts as "living with parents" according to the government. And what is the first thing the young do to deal with a lousy economy? Go back to school. So the Millennial household formation crunch has a lot more to do with it than simply a lousy economy - it has to do with education. When all of these people start getting jobs, there is going to be a major housing shortage. 

As the Fed continues to pump money into the system, it has to be cognizant of the possibility of bubbles. Janet Yellen believes the Fed can prevent them through regulation and views interest rates as a second line of defense. Color me skeptical. The Fed comes to the rescue at every financial hiccup (remember the "Greenspan Put?") and that is a recipe for bubbles. It still amazes me that the Fed believes monetary policy can cause inflation (too much money chasing too few goods) but it can't cause bubbles (too much money chasing too few assets). Is it a coincidence that the South Sea Bubble, which wiped out Sir Issac Newton in 1720 followed the foundation of the Bank of England in 1694? (see the chart below).

No Morning Report next week as I will be away on vacation...