Morning Report: Jobs report disappoints.

Vital Statistics:

 LastChange
S&P futures4,20918.8
Oil (WTI)69.510.07
10 year government bond yield 1.61%
30 year fixed rate mortgage 3.16%

Stocks are higher this morning despite a disappointing jobs report. Bonds and MBS are flat.

The economy added 559,000 jobs in May, according to BLS. This number was below Street expectations. Leisure and hospitality accounted for about half of the new jobs created. The April number was revised upward to 278,000 so that report remains surprisingly weak.

The unemployment rate fell from 6.1% to 5.8%, however the labor force participation rate fell from 61.7% to 61.6%. The employment-population ratio did rise however to 58%

Average hourly earnings rose 0.5% MOM and 2% YOY. The big increase in lower-paid leisure / hospitality jobs is pulling down average hourly earnings, and is a reversal of what we saw a year ago.

Note that the ADP report showed that close to a million jobs were added in May, so there is a good chance this payroll number gets revised upward in the next couple of reports. One other point to keep in mind is that the seasonal adjustments have probably been introducing noise into the series as last year’s payroll volatility was a huge shock. The non-seasonally-adjusted payroll number was close to ADP’s estimate.

Independent mortgage bankers made $3,361 on each loan in the first quarter of 2021, which was the best first quarter on record. It was a decline from the fourth quarter, however that reflects the normal seasonality of the business. “Despite dropping slightly from the fourth quarter of 2020, net production profits reached their highest level for any first quarter since the inception of MBA’s report in 2008,” said Marina Walsh, CMB, MBA Vice President of Industry Analysis. “Triple-digit basis-point profitability was seen for the fourth consecutive quarter – another record that surpasses the 2012 boom generated from Home Affordable Refinance Program.”

Average volume fell slightly to $1.44 billion in the first quarter, and production revenue came in at 408 basis points. Net secondary marketing revenue decreased to 331 basis points from 346 in the fourth quarter. Purchase percentage fell to 39% from 43%.

Productivity fell to 3.6 loans per production employee from 4.2 in the fourth quarter. Since volumes were pretty much the same, it shows that mortgage banks added a lot of people in the first quarter.

Author: Brent Nyitray

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

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