The May jobs report was stronger than expected

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Published Date 6/7/2024

The reaction to this morning’s May employment report drove the 10 year note to 4.43% +14 bps, MBS prices on the initial reaction declined 35 bps. The unemployment rates expected unchanged at 3.9% increased to 4.0% the first-time unemployment rate at 4.0% since January 2022; NFP jobs +272K against forecasts at 182K, private jobs increased 229K against 168K estimates. Average hourly earnings month/month thought to be +0.3% reported at +0.4%, year/year increased to 4.1% with estimates at 3.9%, but the labor participation rate declined to 62.5% with estimates at 62.7%, the report saying most of the decline in participation were people under 25, BLS saying participation of prime-age workers (25-54) hit a new post-pandemic peak, the size of the labor market shrank by 250K for the first time in 4 months. A survey of households showed a 408,000 decline in the number of people who said they were employed, the biggest drop since the end of 2023. The service sector accounted for two-thirds of the job gains.

This report doesn’t jibe with other data for job growth, not sure what the issue is but recent JOLTS opening continue to decline, at the lowest level since prior to the pandemic. The job growth almost 100K more than forecasts are likely to be part time jobs, unemployment claims are increasing, continuing claims released yesterday increased yet the BLS data conflicts with most other measurements that show employment is slowing. The decline in the labor participation rates declined, another suggestion the data this morning should be questions.

From the perspective of reaction, the questionable data doesn’t matter. It is what it is, even though we think the data is flawed and wonder where the BLS gets these numbers. We are not alone in that belief, the comments from money managers and some hedge funds also find the data on the strong job growth doesn’t add up with other job measurements.

At 9:30 am the DJIA opened -84, NASDAQ -70, S&P -18. 10 year 4.41% +23 bps. FNMA 6.0 30 year coupon at 9:30 am -39 bps from yesterday’s close and -35 bps from 9:30 am yesterday.

At 3 pm April consumer credit.

All the improvement this week since Monday are gone this morning. Next week CPI, PPI, FOMC meeting, Treasury will auction 3s, 10s, and 30s.

Source: TBWS

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