Labor Market Gets a Dose of Happy News

The weak labor market found something to smile about last Friday. The official Jobs Report for November was released - and the improving numbers were a big surprise to the markets. According to the Labor Department, only 11,000 jobs were lost in November, despite expectations of 125,000 jobs lost. As you can see from the chart below, this marks the least number of jobs lost in nearly two years - since December 2007. Adding to the favorable news, the Unemployment Rate improved to 10.0%, when expectations were for it to remain at the 10.2% level. While the news was good for the economy and helped Stocks improve sharply, it wasn't so favorable for Bonds...and as a result, home loan rates moved slightly higher on the news, continuing their worsening trend for the week overall. Chart: 2009 Job Growth/Losses (In Thousands) In other news, based on early numbers, 195 Million shoppers hit the stores and websites on Black Friday, which was up from last year's 172 Million. Cyber Monday - the online equivalent of Black Friday - also showed an increase in web shoppers, up by 6% from last year. It appears that the shopping traffic was up, but the dollars-per-shopper may be down a bit. This might be indicative of not only consumers being conservative...but also the fact that with all the deep sales taking place to incent buyers, fewer dollars may be spent to get the very same merchandise as a year ago. Forecast for the Week The week ahead starts out a bit sleepy in terms of economic reports, with no major releases due until Thursday when the Initial Jobless Claims report and the Balance of Trade report will both arrive. Friday will bring another shot of economic news when the Retail Sales Report - the most-timely indicator of broad consumer spending patterns - is released. We'll also get a look at the Consumer Sentiment Index for an updated snapshot of how consumers are feeling about the economy. In addition to these reports, the markets will be watching the latest round of Treasury auctions. This week's auctions include longer-term maturities such as 10-year Notes and 30-year Bonds that compete with Mortgage Backed Securities or Mortgage Bonds. So as we've been seeing of late, the auctions could cause some volatility, depending on how well they are received. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Mortgage Bonds hit a high for 2009 on November 27th, but traded lower last week due to financial news and a better-than-expected Jobs Report. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Dec 04, 2009)