Morning Report: Strong jobs report

Vital Statistics:

	Last	Change
S&P futures	4,112	-40.25
Oil (WTI)	88.93	-0.36
10 year government bond yield		2.82%
30 year fixed rate mortgage		5.33%

Stocks are lower this morning after the hot employment situation report. Bonds and MBS are down.

The July employment situation report was exceptionally strong. The economy added 528,000 jobs and the unemployment rate ticked down to 3.5%. Job gains were most pronounced in leisure / hospitality and business / professional services. The unemployment rate is back to pre-pandemic levels. The interesting thing is that the labor force participation rate and the employment-population ratios remain well below their pre-pandemic peaks.

Average hourly earnings seem to be accelerating again. Month over month, average hourly earnings rose 0.5%, which was a pickup from the 0.3% reported in June. On an annual basis, they rose 5.2%.

Bottom line: the labor market is strengthening, not weakening. This makes the Fed’s job harder, but it also means that any recession we get will fell milder than normal.

Rocket reported second quarter numbers yesterday. Volume was down a whopping 58% on a YOY basis, although gain on sale margins improved. Earnings per share came in at $0.02. Like most originators, servicing income has offset declining origination income. The company continues to build out its ancillary businesses such as Rocket Homes and Rocket Money.

Rocket has been hit by the disappearance of the rate / term refinance, but purchases are suffering too as a combination of higher home prices and higher rates dampen buyer sentiment. The company has been cutting costs, but it will also maintain some excess capacity so it can grow in the future.