Morning Report - labor market is tightening

Vital Statistics:

	Last	Change	Percent
S&P Futures	2060.8	-16.9	-0.81%
Eurostoxx Index	3558.4	-51.9	-1.44%
Oil (WTI)	49.78	-0.2	-0.44%
LIBOR	0.265	0.001	0.38%
US Dollar Index (DXY)	98.35	0.759	0.78%
10 Year Govt Bond Yield	2.14%	-0.05%
Current Coupon Ginnie Mae TBA	102.1	0.3
Current Coupon Fannie Mae TBA	101.1	0.1
BankRate 30 Year Fixed Rate Mortgage	3.92

Markets are lower this morning as commodities fall and the dollar climbs. Bonds and MBS are up as the German Bund hits new highs, with a yield of 26 basis points. German Bund yields are negative through 7 years, as the ECB buys the 5 year at a negative yield. 

The continuing rally in European bonds will probably support the US 10 year as global bond managers unload Bunds to the ECB and buy Treasuries instead. The caveat is that inflation has to remain nowhere to be found in the US. Yesterday, Cleveland Fed President Loretta Mester sounded hawkish, saying that at 5.5% unemployment we are close to meeting the Fed's full employment mandate. Of course this assumes that the current labor force participation rate of 62.8% is the new normal. Color me skeptical - I think a lot of these people who are out of the labor force want to work and will choose to if given the opportunity. This will keep a lid on wage growth. 

Job Openings remained around 5 million, according to the JOLTs job report. We are back to early 2001 levels. Hires decreased to 5 million and separations were unch'd at 4.8 million. The quit rate was unchanged at 2%.

Small business optimism rose a hair in February, according to the NFIB to 98 which has been the long-term average of the index, including the Great Recession. It is the third highest reading since 2007. We are seeing more evidence of labor shortages, however, with 53% of the respondents trying to hire, but 47% reported few or no qualified applicants. 29% of all owners reported job openings they cannot fill, which is the highest reading since early 2006. That said, sales fell, which could have been weather-related. 60% reported increased capital expenditures, which is the strongest reading since Oct 2007. Inflation remains nowhere to be found, and it looks like business owners are unable to raise prices.

CFPB Director Richard Cordray appeared before the House yesterday to discuss QM, payday lending, and overdraft protection. The discussion fell along usual partisan lines, with Democrats pushing for more consumer protection, and Republicans worried about limiting consumer choice.

Foreclosures continue to fall, according to CoreLogic. They were down 14.7% month over month and 22% year over year. The seriously delinquent rate of 4% is the lowest since June of 2008. Foreclosure inventory is 549k, down 33% from a year ago.