Morning Report: Blowout jobs report

Vital Statistics:

	Last	Change	Percent
S&P Futures	2085.5	-8.5	-0.41%
Eurostoxx Index	3460.4	12.9	0.37%
Oil (WTI)	44.78	-0.4	-0.93%
LIBOR	0.337	0.003	0.90%
US Dollar Index (DXY)	99.27	1.333	1.36%
10 Year Govt Bond Yield	2.32%	0.09%
Current Coupon Ginnie Mae TBA	104.4
Current Coupon Fannie Mae TBA	103.3
BankRate 30 Year Fixed Rate Mortgage	3.76

Stocks are lower this morning after the jobs report sets the stage for a December rate hike. Bonds and MBS are down.

Jobs report data dump:

• Nonfarm payrolls + 271k 
• Unemployment rate 5.0%
• Average Hourly Earnings 0.4% MOM / 2.5% YOY
• Underemployment rate 9.8%
• Labor Force Participation rate 62.4%

Bond yields dropped hard on the report, with both the 10 year and the 2 year yields up 9 basis points. The Fed Funds future contracts moved substantially after the report, going from a 56% probability of a December rate hike to a 72% chance. Retail and construction drove the increase. Manufacturing payrolls were flat, as manufacturers struggle with a strong dollar. Still hard to reconcile the strong payroll and nascent wage growth with the low labor force participation rate. 

In response to the jobs report, RBS, BNP, and Barclay's all moved their first rate hike forecasts to December. 

The holy grail for the economy (and the Fed) is wage growth. Prior to the Great Recession, wage inflation was running around 2.9%. Subsequently, it has grown at about 2%. If you look at the graph below, you can see where the slope of the line changes at 12/31/08. 

RealtyTrac's latese Home Sellers Report shows that people who sold in the third quarter realized an average gain of just over $40k, which amounts to a 17% increase in price. This is the best level since 2007. They calculate the average sales price was about $264k. The use of FHA loans continues to grow - FHA loans were 23.4% of all financings. All-cash sales as a percent fell to their lowest levels since 2008 - a sign that professional investors are being replaced by "real" buyers. 

That said, we still have a problem with the first time homebuyer. The percentage of first time homebuyers fell again to 32% from 33% last year and is the third straight annual decline. The 32% number is the lowest since 1987. "Normalcy" is about 40%. The big problem: affordability and a dearth of inventory.

In a novel theory, New York Attorney General Eric Schneiderman is accusing Exxon Mobil of securities fraud. The crime? Downplaying the risk of climate change to the company's business model. Not sure how something that might happen in 2100 is material to their stock price, but there you go. But, the government is now in the business of suppressing and criminalizing research that it doesn't like.