An Unexpected Job Rebound

Wow!!!!! A 10 MILLION job surprise! America’s labor market unexpectedly rebounded last month, signaling the economy is recovering much faster than expected!

2.5 million jobs were created in May versus the 8.5 million expected to be lost. Instead of being the worst jobs report in American history, it showed the biggest one-month jobs gain in U.S. history! There were actually 3.1 million private jobs created that were offset by government losses due to the shutdown.

The big gains come after 20.5 million jobs were lost in April. The Unemployment Rate fell to 13.3% from 14.7% in April, well below the 20% anticipated.

Overall, a blockbuster report and much better than economists’ expectations. The "V-SHAPE" economic recovery thesis remains very much alive after this report! All signs are pointing towards a swift economic recovery, especially with the coronavirus uncertainty abating.

The demand has been so high for goods and services that employers HAD to hire workers back. Like Jim Cramer from CNBC said of the report ... "Stunning."

We say "FANTASTIC"!

Economic data from Europe continues to show improvement. Italy reported its lowest unemployment rate in 12 years in May, as millions of people went back to work. Manufacturing data from France and Spain easily beat expectations. In response, European country bond yields have been on the rise. We like to track Germany and their 10-year Bund yield is at - .38%, well off the -.60% seen on May 1st. The German 10-year Bund yield has improved to .27%. The increase in German yields is adding to the impact on U.S. bond yields.

Here in the U.S., Mortgage Bonds are lower, though off their worst levels. There is a pricing disconnect with Treasuries again as the 10-year Note has spiked to .92%. Technically, resistance becomes support. The 10-year yield moved above the well-documented ceiling at .76%, which means that it is about as good as rates can get. For Mortgage Bonds, prices have fallen well below the 50-day Moving Average. This must not be ignored.

Just like that the world has changed. Economic optimism, policy response and coronavirus going away are putting upward pressure on global yields. Something bad would have to happen to derail this trend.

Markets are reacting as you would expect with interest rates spiking. Momentum is shifting in the markets. Borrowers would be wise to capture these rates while they exist. Track 1% on the 10-year Note yield - a bust above that ceiling, likely soon, may usher in another rise in rates.