Employment Happy Talk
For once we have no “buts” to add to this week’s almost straight up good news.
The Fannie Mae National Housing Survey, a large (1,000 household) attitudinal survey hasn’t produced a lot of happy talk in its five year history so the May results stand out. There were month over month gains in respondents reporting significant increases in household income in the past year (4 percentage points) and expectations that personal finances will improve in the next year (1 point). Those who think it is a good time to buy a house increased three points to 66% while those viewing it as a good time to sell hit a survey high of 49%. Finally only 27% said they would rent rather than buy if they moved, a one month drop of 5 points.
The week’s headline however was JOBS. As we went to press last week jobless claims were reported down by 8,000, followed the next day by a boffo May Employment report; a 280,000 increase in non-farm payrolls (analysts were looking for 220,000), a 32,000 job revision to the prior two months’ estimates, and a 1 tenth uptick in the labor participation rate. To top it off, household earnings came in near the top of expectations at +0.3%. Year-over-year earnings were up 2.3%, a rate last matched in October 2013.
Then came JOLT, the Labor Department’s Job Openings and Labor Turnover Survey, not a metric widely covered by media. Its April news should be. Per Bloomberg, “Job openings surged to 5.376 million. This is the highest reading in the history of the series going back to 2000. Year-on-year, openings are up an eye-popping 22 percent!”
Of course we were only kidding about those “buts.” There is always a downside and the June 5th Employment Report sent bond markets reeling and the yield on the 10-year T-note up to 2.47%, an eight month high.
Kathy Jones, a Fixed Income Strategist with the Schwab
Center for Financial Research was quoted by the AP as predicting the 10-year note yield could climb as high as 2.5 percent short term if the economy continues to bounce back from its sluggish 2015 beginnings. The jobs report “will certainly keep rates moving higher,” she said.
Bloomberg said the Employment Situation report probably wasn’t enough “to raise expectations for a rate hike at this month’s FOMC but will be enough to raise talk for a hike at the September meeting.”
With the JOLT release they will have even more to discuss. We will be listening.