Morning Report: Decent jobs report

Vital Statistics:

	Last	Change
S&P Futures	2156.0	-1.0
Eurostoxx Index	340.7	-2.0
Oil (WTI)	50.2	-0.3
US dollar index	87.7	0.0
10 Year Govt Bond Yield	1.76%
Current Coupon Fannie Mae TBA	103.3
Current Coupon Ginnie Mae TBA	104.2
30 Year Fixed Rate Mortgage	3.54

Stocks are flat this morning after an ok jobs report. Bonds and MBS are down.

Jobs report data dump:

• Nonfarm payrolls increased by 156,000 (August revised upward)
• Unemployment rate 5%
• Labor Force Participation Rate 62.9%
• Average weekly earnings up 0.2% (2.6% annually)
• Average weekly hours 34.4

Overall, a decent report, but nothing to write home about. The best news in the report was the increase in the participation rate as the labor force increased by about 440k while the number of employed increased by about 350k. The labor force participation rate looks like it may have bottomed, at least for now.

Global sovereign debt continues its sell-off, with the German Bund venturing back into positive yield territory. Overnight we had a flash crash in the British pound, which fell 6%. For currency traders, a 6% move is gargantuan. 

We will have a lot of Fed-speak today, with Stanley Fischer at 10:30, Loretta Mester at 12:45, Esther George at 3:00 pm and Lael Brainard at 4:00. 

Bank of America is out with a report saying that the new populism and push-back against globalization represents a possible sea-change in asset pricing. The big picture is that we are moving from a "deflation" asset pricing environment to an inflation asset pricing environment. Corporate profitability will suffer as wages increase, regulation increases, and people push back against using globalization as a means of cost-cutting. Government attempts to goose the economy will transition from monetary stimulus to fiscal stimulus. Overall, bad for bonds, but probably good for real estate. 

Assuming Hillary wins, she may face the same nemesis her husband did early in his first term: bond market vigilantes. Every time Bill Clinton talked about stimulating the economy, bonds would sell off, which would offset any potential stimulative effect. Bob Woodward said that Bill Clinton's reaction to this dynamic as :"You mean to tell me that the success of my program and my reelection hinges on the Federal Reserve and a bunch of f*****g bond traders?" Clinton political adviser James Carville said at the time that “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody." 

Regardless of what this does to the refi market, it should positively affect the purchase market. Currently, the homeownership percentage for the Millennials is about 34%. That number should increase to above 40% as the Millennial age cohort hits homebuying age. The homeownership rate for the 35-45 age cohort has historically been 60%+. So there is a lot of pent-up demand for homes, which should keep the purchase business humming for many years to come.