Jobs All Round

Well it was all about the NFPs this week and they didn’t disappoint. The whisper was better, the actual was way better. But then the unemployment rate was worse, reaching a 25 year high. The market spiked, $ fell and bonds sold off. We’re on the road to recovery so saddle up and enjoy the ride. Looking through the numbers and they looked reasonably robust. Government jobs weren’t propping this one up, in fact they were down and the unrounded unemployment rate was (only) 9.357. Joe Lavorgna of DB however pointed out something interesting…
” In particular, the weakness in hours and earnings are reason for concern. The length of the workweek declined by 0.1 hour to 33.1 hours, which is the aggregate hour equivalent of an additional loss of about 350k jobs. More importantly, the manufacturing workweek also declined (39.3 hrs vs. 39.5 previously)?this is a negative sign for inventory restocking in the current quarter, because inventory rebuilds have historically been accompanied by a rise in manufacturing hours worked. Average hourly earnings rose 0.1% in the month, lowering the 3- and 6-month rates of change to 1.7% and 2.2%, respectively. In short, wages are rolling over”

So the lower hours compensate for the better number and wage inflation is slowing. The detail certainly seems to have taken some wind out the sails of this move. $ reversed its previous loss and bonds have rallied back somewhat too with the 10yr around 3.83 having been at 3.90 earlier and equities have come back too.

It turns out the GBP sell off yesterday was due to the FX hedging on the Rio capital raising. This makes more sense to me as I was sceptical of the idea that Brown leaving would be taken badly by the market. Hope springs eternal and all that (and indeed hope has proved a pretty good investment strategy in the last few months). Remember the reaction of the market to the news that Geithner was going to be appointed…