Morning Report - lousy jobs report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1994.3	-3.5	-0.18%
Eurostoxx Index	3277.2	-0.1	0.00%
Oil (WTI)	94.33	-0.1	-0.13%
LIBOR	0.234	0.001	0.43%
US Dollar Index (DXY)	83.68	-0.145	-0.17%
10 Year Govt Bond Yield	2.41%	-0.04%
Current Coupon Ginnie Mae TBA	106.8	0.2
Current Coupon Fannie Mae TBA	106	0.2
BankRate 30 Year Fixed Rate Mortgage	4.2

Markets are lower after a lousy jobs report. Bonds and MBS are up.

The jobs report came in surprisingly weak. Payrolls increased 142k in August, while the Street was expecting to see 230k. The two-month revision was -28k. Unemployment ticked down to 6.1%, however the labor force participation rate dropped back to its lows at 62.8%. Average Hourly Earnings rose .2% and the workweek was flat at 34.5 hours. Overall, a very disappointing report that doesn't really comport with some of the other data we have been seeing (like the ISM which has been super strong). I wouldn't be surprised to see this report revised upward (for the record, August reports are notorious for big revisions), but for the moment, there it is. 

Demographically, it looks like the biggest growth was in the 25-35 year old cohort, which is what we need to see in order to bring back the first time homebuyer. Interestingly we saw a bit of growth in the 55+ age bracket. 

Minneapolis Fed President Kocherlakota believes the Fed should be doing more, not less to stimulate the economy. He says that "interest rates are not low enough....Given where we are with inflation, I think that it's challenging to know why we are removing stimulus from the economy at the rate that we are." Note that the makeup of the Fed changes every year, and two hawkish voting members - Plosser and Fisher are being replaced by doves Evans and Lockhart. This  will mean one lone hawk, four neutral, and five doves. 

Mortgage credit tightened slightly in August, according to the MBA. Credit did ease for 203k loans and construction loans, but overall credit dipped, particularly on the government side.