TGIF. Nonfarm Payrolls jumped 192K in February, confirming slow but steady job growth. January was revised higher, now at 63K versus the reported plus 36K. Weather suppressed January’s print on the initial release. The surprise in this report was another drop in the Unemployment rate which fell from 9% to 8.9%. Many think this is funny math but in our opinion, the drop is all about people giving up on their job search which reduces the unemployment count. That’s how you take a negative and turn it positive. Within the numbers, the Services Producing sector posted the best gain, adding 152K to the payrolls. Even Construction employment increased by 33K. Overall, the report had a little something for everyone; better jobs growth (plus 192K), falling unemployment rate (8.9%), and a close to consensus report that has kept bond, note, and mortgage back yields steady to lower. I’ll take this report any day. Factory Orders were also released, up 3.1% following last month’s plus 1.4% print. The strong showing was driven by a 3.1% gain in Non-Durable goods orders. Those are products with less than 3 years shelf life. Durable Goods did not impress once you stripped out the orders for aircraft. Overall, we’ll call the report “solid”. Reaction to all of this has not been what you would expect. Currently, stocks are off 50 points, 10 year notes are up a dozen (yield 3.52%), and mortgage backs are lean and green, up 8/32’s as we speak. Best reason I can give you for the money flows is that the Employment Report is water under the bridge and traders focus is now back on MENA. Oil up over $1.00 and escalating violence in Libya is back in the driver’s seat. Volatility is back in both bonds and stocks so be careful out there. Take advantage of the rallies as you never know how the next headline will read. We’ll try to wrap this up before we call it a week.
Scotty
Scott Eggen
SVP, Capital Markets
PrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900
Dallas, Texas 75252
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