Morning Report: Jobs report disappointing

Vital Statistics:

	Last	Change
S&P Futures	2180.0	2.0
Eurostoxx Index	351.0	0.3
Oil (WTI)	44.2	-0.2
US dollar index	86.5	-0.2
10 Year Govt Bond Yield	1.59%
Current Coupon Fannie Mae TBA	103.3
Current Coupon Ginnie Mae TBA	104.2
30 Year Fixed Rate Mortgage	3.5

Markets are slightly higher this morning on no major news. Bonds and MBS are flat.

Jobs report data dump:

• Nonfarm payrolls + 151k vs 175k expected
• Unemployment rate 4.9% vs 4.8% expected
• Labor force participation rate 62.8% flat
• Average hourly earnings +0.1% vs. 0.2% expected
• Average weekly hours 34.3 versus 34.5 expected

Overall, not a report that should move the needle for the Fed, especially with respect to the September meeting. Bonds initially rallied on the report, but sold off during the rest of the day. The key numbers (the disappointing hourly earnings and average weekly hours) point to the Fed standing pat in September.

The ISM Non-Manufacturing missed expectations by a country mile, falling to 51.4 versus expectations of 55. Growth is still positive (since the number is above 50), but growth took a big step back. 

The Labor Market Conditions Index slipped to -0.7 in August. 

Lack of construction workers are a drag on housing, according to Freddie Mac. About 30% of the construction workers from 10 years ago found jobs in other fields. There are about 200,000 unfilled construction jobs in the US at the moment, and the ratio of job openings to hiring is the highest since 2007. The number of open jobs has increased 81% over the past two years. 

Home prices rose 6% YOY in July, according to CoreLogic. Home price appreciation continues its torrid pace out West, while the Northeast and Midwest lag. We are beginning to see overvalued markets especially out west. Here is a map of the overvalued (red) and undervalued (green) markets:

Delinquencies ticked up in July, according to the Black Knight Financial Services Mortgage Monitor. Part of that was technical, with the month ending on a Sunday. Foreclosures and foreclosure inventory continue to work their way downwards.

What are the markets thinking about the Hillary versus Trump match up? While the US has some betting markets, the UK has a very liquid market in betting. You can track the markets here, at Sporting Index. The current markets are here:

The original bets pre-dated the conventions, so the payout is 25 if the person gets the party nomination and 50 if they win. Based on these markets the implied probability of the election is 72% Clinton, 28% Trump. FWIW, in the US-based PredictIt markets, Trump costs 37 cents and Hillary costs 64 cents...