The jobs report says the recession ended last month

Vital Statistics:


Last Change
S&P futures 3173 64.1
Oil (WTI) 38.84 0.39
10 year government bond yield 0.92%
30 year fixed rate mortgage 3.29%


Stocks are higher this morning after the jobs report showed the economy added jobs in May. Bonds and MBS are down.


Jobs report numbers:

  • Nonfarm payrolls rose by 2.5 million.
  • Unemployment rate fell to 13.3%
  • Average hourly earnings up 6.7% YOY
  • Labor force participation rate 60.8%

The message from this report is that the economy turned the corner in May and the recovery has begun. Street expectations for this report were way off. The average forecast for payrolls was a loss of 7.7 million jobs, and the forecast for unemployment was 19.8%. The average hourly earnings numbers are interesting. They were down 0.1% MOM, but up 6.7% YOY. I suspect that the higher paid furloughed workers were brought back first, and now we will see the lower paid workers return as retail and restaurants re-open.


The big takeaway from the jobs report is that the recession probably ended last month. I expect to see big upward revisions in the Q2 economic forecasts.


Black Knight reported that the number of loans in forbearance fell slightly last week. “After rising sharply in April and then leveling off toward the end of May, the number of American homeowners in forbearance plans has now decreased for the first time since the crisis began,” said Jabbour. “There were a net 34,000 fewer homeowners in forbearance as of June 2. The decline was actually greater among government-backed mortgages, which saw 43,000 fewer total forbearance plans than last week, but this was partially offset by an increase of 9,000 new plans on mortgages held in bank portfolios and private-label securities.”


Invitation Homes (a single family home REIT) reported that it collected 97% of historical rent in May, so despite the scary numbers from the survey about New York City rent, the rest of the country seems to be doing much better.


The jobs report sent bonds lower, with the 10 year trading around 0.9%. After such a huge move in the long bond, a retracement was to be expected. That said, mortgage rates might not go anywhere as aggregators fight for business and mortgage backed security spreads tighten.




Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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