Once again, it’s time for the mother of all data releases, the Employment Report for January. Expectations for tomorrow’s release are as follows;
<!--[if !supportLists]-->1) <!--[endif]-->Nonfarm Payrolls – Plus 136K
<!--[if !supportLists]-->2) <!--[endif]-->Unemployment Rate – 9.5%
<!--[if !supportLists]-->3) <!--[endif]-->Average Hourly Earnings – Plus .2 (m/m % change)
<!--[if !supportLists]-->4) <!--[endif]-->Average Workweek – 34.3 Hours
Our forecast, based on better than expected jobs creation in manufacturing, should print Nonfarm Payrolls at plus 150K with the unemployment rate coming in at 9.5%. For the most part, Good Producing surveys in manufacturing indicate mixed pockets of strength. The ISM National survey however, shows strong growth with its employment index at the highest level since 1973. Seems optimistic to us but just the same, the additional 15K in our bias comes from this sector. Services producing jobs should be strong, somewhere in the neighborhood of plus 150K following last month’s plus 115K print. The losers in the report should be temporary workers and Federal, State, and local governments that are laying off due to waning tax receipts. One factor that is a wild card is the weather and what kind of an effect it will have on the data. Kind of a crap shoot. Given how the market has backed up into the number (higher yields/worsening mortgage pricing), an as expected to slightly higher number should produce a mini rally or at least hold pricing steady. We feel that only a number over 200k will feed the bears and push mortgage rates higher. On the flip side, any number under 100K should produce a nice rally. Something to the tune of a .50 bps improvement in pricing. We shall see. Currently, the market is fading into the afternoon close. Mortgage backs off 12/32’s while the 10 year note trades a yield of 3.55%. Looks stinky on the chart so cover up and hunker down. So you ask, what are other s saying. Here’s just a few.
<!--[if !supportLists]-->1) <!--[endif]-->UBS – plus 80K at 9.4%
<!--[if !supportLists]-->2) <!--[endif]-->JP Morgan – plus 140K at 9.5%
<!--[if !supportLists]-->3) <!--[endif]-->Nomura – plus 140K at 9.5%
<!--[if !supportLists]-->4) <!--[endif]-->Moody’s – plus 160K at 9.6%
<!--[if !supportLists]-->5) <!--[endif]-->Wells Fargo – plus 175K at 9.5%
The best in breed last month was Lloyds TSB. Their call this month is plus 125K at 9.6%. For the sake of better pricing, I hope they make it two in a row.
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