June 3rd, 2011 10:46 AM by Lehel S.
May non-farm jobs were up just 54K, non-farm private jobs +83K; the unemployment rate increased to 9.1% frm 9.0% in April. April and March non-farm jobs were revised down by an additional 39K. Manufacturing down 5K, government jobs -29K mostly at the state level. The U-6 jobless rate 15.8%; those underemployed and those that have stopped looking. Jobless duration 27 weeks or more 6.2 mil up frm 5.839 mil in April. Going into the report the estimates were +150K non-farm jobs, +175K private jobs, 8.9% unemployment rate; estimates were all over the place but those were the general consensus.
The bullish view is that the slowing in the economy is temporary; weather, high gas prices and climbing food prices are pulling the economy lower. There is however a hard core group of forecasters, mostly those whose business requires investments in equities, that will continue their bullish outlook on the belief all those factors will go away soon. The word "temporary" is being tossed around loosely, yes the economic decline is temporary but we need some definition of the word in terms of specifics. The more realistic view, at least in our opinion is that consumers have a long way to go ion repairing their balance sheets and re-adjusting to the "new normal" economy that appears to be ignored by Wall Street. As long as house prices continue to fall and people increasingly lose faith in our political leaders businesses will not increase hiring, unemployment will remain high and the economy will stagnate with only minor growth.
Crude oil is falling this morning on the soft jobs report, weaker economic outlook means less oil usage. The DJIA opened at 9:30 down -110, the 10 yr note +21/32 2.96% -7 bp and mortgage prices +15/32 (.47 bp).
Will there be a QE 3 from the Fed given the weakening economy? The more important question is; will a QE 3 actually help the economy? QE 2 didn't help much as is evident by recent data, housing still in depression and unemployment increasing again. The Fed;s QE 2 pushed investors into the equity markets, but did noting to help consumers or the all-important housing markets. Low interest rates are welcome, however the level of interest rates are not the issue.
At 10:00 the May ISM services sector data; the overall index expected at 54 frm 52.8 in April, actually increased to 54.6. New orders up to 56.8 frm 52.7, prices pd 69.6 frm 70.1 and employment 54.0 frm 51.9. The report is the best report seen in the past two weeks on the economy. it wasn't huge but anything better will keep interest rates from declining much the rest of the day. The initial reaction helped the stock indexes off their worst levels and took a few clicks off the 10 yr and mortgage prices.