Matt and I apologize for not publishing another post yesterday afternoon...we hit the wrong key and deleted our entire commentary (HAHAHHAHAHA. Too soon?)

The Bureau of Labor Statistics has released the Employment Situation Report....

From the Release...

Nonfarm payroll employment rose by 290,000 in April, the unemployment rate edged up to 9.9 percent, and the labor force increased sharply, the U.S. Bureau of Labor Statistics reported today. Since December,
nonfarm payroll employment has expanded by 573,000, with 483,000 jobs added in the private sector. The vast majority of job growth occurred during the last 2 months

This was the largest gain in payrolls since March 2006 (+304K)

Federal government employment was up in April, reflecting the hiring of 66,000 temporary workers for the decennial census

The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.1 hours.

The average hourly earnings of all employees in the private nonfarm sector increased by 1 cent to $22.47 in April. Over the past 12 months, average hourly earnings have increased by 1.6 percent.

Job gains occurred in manufacturing, professional and business services, health care, and leisure and hospitality. Federal government employment also rose, reflecting continued hiring of temporary workers for Census 2010.

Household Survey: The US Census Bureau surveys 60,000 households with a series of questions regarding their participation in the labor force. They ask questions like: Are you working? Full Time or Part-Time? Are you part time because you can't find a full time job? How long have you been looking for a job? How many weeks have you been unemployed? How old are you? This is the Household Survey or the Population Survey. This survey is the foundation for the Employment Situation Report.

  • the labor force continues to grow as job seekers see economic conditions improving. +805,000 folks re-entered the labor force
  • the number of unemployed persons rose by 255,000...a greater number of unemployed Americans is mostly a function of the BLS's technical definitions of "employed" and "unemployed". To be counted as employed a person must have either a full time job or part time job. The household survey includes includes agricultural workers, the self-employed, unpaid family workers, and private household workers. To be counted as unemployed  a person must be in the labor force (available for work) and fall into one of these three categories: 1. No job but have made effort to get one in last four weeks. 2. Waiting to start a new job in next 30 days.3. Laid off and waiting to be called back to work
  • the number of employed people rose by 550,000 (add the number of unemployed to the number of employed. Its 805,000 or how much the labor force grew in April)

How long have the "unemployed" been out of work?

  • the number of people who have been out of work for longer than 27 weeks grew by 169,000 to 6.716 million
  • the number of people who have been unemployed between 15 and 26 weeks fell by 183,000. The reduction in this metric accounts for the rise in the +27 week category
  • the 5 to 14 week category was 237,000 lower. These are likely seasonal workers who were able to get back to work after a long winter


Establishment Survey: The sample establishments are drawn from private nonfarm businesses such as factories, offices, and stores, as well as from federal, state, and local government entities. Employees on nonfarm payrolls are those who received pay for any part of the reference pay period, including persons on paid leave.  In the establishment survey, employees working at more than one job and thus appearing on more than one
payroll are counted separately for each appearance. The establishment survey does not includes agricultural workers, the self-employed, unpaid family workers, and private household workers among the employed.

  • Manufacturing added 44,000 jobs in April. Since December, factory employment has risen by 101,000.
  • Mining added 7,000 jobs in April, with most of the increase in support activities for mining. Since last October, mining has added 39,000 jobs
  • Construction employment edged up 14,000, following an increase of 26,000 in March. Over the month, nonresidential building and heavy construction added 9,000 jobs each.
  • Professional and business services rose by 80,000 in April. Temporary help services continued to add jobs (26,000)
  • Health care employment grew by 20,000, including a gain of 6,000 in hospitals. Over the past year, health care employment has increased by 244,000.
  • Federal government employment was up in April, reflecting the hiring of 66,000 temporary workers for the decennial census.
  • Transportation and warehousing fell by 20,000 in April, reflecting a large decline in courier and messenger service


Plain and Simple: the 2010 Census contributed 66,000 jobs to the 290,000 rise in April payrolls . This tells us the private industry is playing its part in the labor market recovery process. February Payrolls were revised from -14,000 to +39,000. March payrolls were revised higher from +162,000 to +230,000. That accounts for a swing of +121,000 positions on top of the 290,000 seen in April.  The unemployment rate did move higher but that is going to happen as the economy recovers and people re-enter the work force faster than jobs can be created. Remember how the BLS defines "unemployed" and "employed"  (see comments above). It is not a good sign for consumer spending that average hourly earnings can't gain any traction...especially after we learned that productivity is still running at record levels and labor costs are falling (READ MORE).On the bright side...that keeps inflation low.

MY BIGGEST ISSUES (still):  The number of people out of work for longer than 27 weeks continues to tick higher, now at 6.7 million Americans. The total number of people out of work or underemployed moved up to  17.1% of the workforce. This is a heavy social spending burden (unemployment benefits) for the government to carry...


The reaction in markets...

Stocks have opened flat as traders cautiously test the liquidity of the marketplace. The 3.625% coupon bearing 10 year TSY note yield ticked higher overnight but rallied ahead of the equity open. There wasn't much reaction to NFP data. 10s are currently -0-01 at 101-25 yielding 3.41%.

Mortgages had a wild afternoon of their own yesterday as traders scrambled to take in originator hedges and make a market for servicer duration adding needs. Check out that price spike that printed around 4:00pm.  We were wondering if that move higher was a result a Citigroup trader's fat fingers on the "GO" key, however we got feedback that it was not an error as much as a forced real money buying (servicers) which snowballed in an environment that was greatly lacking liquidity (which we speculated would happen yesterday morning). This helped "Rate sheet influential" yield spreads come off their widest levels seen since early fall 2009.

The FN 4.5 is currently -0-01 at 101-16 yielding 4.329%. The secondary market current coupon is 4.288%. The current coupon yield is +87.6bps over the 10 yr note and +81.2bps over the 10 year interest rate swap.


Loan pricing is near its best levels of the year. I would hate to be a pipeline manager right now as fallout risk skyrocketed yesterday when the current coupon yield dipped into the 4.20s.

While I wish I had some divine wisdom to pass along regarding the fate of the markets in the short run...I got nothing. For now, it seems that until the EU is able to enact a firm policy response to their growing crisis of confidence, that stocks will remain defensive and bonds will benefit. The BIG PICTURE message we shared in THIS POST is very relevant though...