The bond market will be closing very early this morning. The way that bond’s are trading this morning that could be good. The bond market was shocked hard by the Employment Situation Report. (See yesterday’s post for an explanation of the Employment Situation Report.)

The two biggest surprises also came from the two most important portions of the Employment Situation Report.

Payrolls grew by 180,000. Economists were only expecting a growth of 135,000 to 168,000. This is obviously a big surprise in one of the months most important items.

The Unemployment Rate is the other very important part of the Employment Situation Report. It surprised the market as well. The bond market was looking for a 4.5% to 4.6% rate. The headline Unemployment Rate was very low at 4.4%. This is an inverse indicator; a lower than expected number is good for the economy, but bad for rates.

Both of these numbers are good enough that even the MSM (main stream media) will have to pay attention to them. It will be very hard for them to 2.2% these numbers.

The MSM may try to find, and then point out the problems in the details of the numbers. They’ll have a chance if the look at the Hourly Earnings; it came in at the low end (+0.3%) of the anticipated +0.3% to +0.4%. Problem for Katie Couric will be how to spin this as a payroll growth of +0.3% inflation adjusted and annualized is +3.6% without even considering compounding interest.

The MSM will not be able to point to the Average Workweek in their search for bad news. It was it 33.9 hours which was above the anticipated 33.8.

As good as this is for the economy, these numbers are going to scare bond traders. An overly strong job market can spark the wage-price spiral. That has pushed the 10-year Treasury up to 4.737. This is an increase of .063% over yesterday’s close.

[Publisher’s note: In an attempt to clean up our blog, we will post all three outlooks on Monday only. We will post an outlook on days when one is modified.]

Steve Boxmeyer [612] 799 – 6858
steve@LendWithIntegrity.com