Labor Department Needs to Get Smart

"MISSED IT BY THAT MUCH." Remember the old show "Get Smart", when bumbling secret agent Maxwell Smart would describe his latest major goof by holding up his fingers about a half-inch apart, and emphatically stating that famous line? In similar fashion...it appears the Department of Labor missed some recent job creation counts by quite a long shot. Last Friday, the highly anticipated monthly Jobs Report arrived bright and early, showing 110,000 new jobs created during September, very close to what analysts had expected. But the real surprise was the upward revision to last month's shocking number, which had shown a LOSS of 4000 jobs in August. The revised number was a gain of 89,000 jobs, or a change of 93,000! That's right - the Department of Labor "missed it by that much." Bond prices and home loan rates worsen on strong or positive economic news, so the surprising upward revisions in job growth caused Bonds and home loan rates to worsen by about .125% on Friday alone.

This coming week should be another juicy one as far as the economic calendar is concerned, with several reports and releases that will have the power to move the markets. Of special note, Tuesday brings the release of the "Meeting Minutes" from the last Federal Reserve Board meeting - and unlike the carefully crafted wording of the formal Policy Statement that is released just following the meeting - the Minutes are the "Fed Unplugged", including commentary and conversation during the meeting by all attending Fed Board members. Dallas Fed President Richard "Loose Lips" Fisher is often a loose cannon, sometimes blurting out off the cuff comments on the economy almost uncontrollably...so it will be interesting to see if the meeting contained any wild cards. Remembering that when Bond prices move lower, home loan rates worsen - we can see in the chart below that Bond prices were slammed lower on Friday, shown by the large red "candle" on the right hand side of the chart. Bonds also were slammed back below floors of a few floors of support, so it appears that the path of least resistance is for Bond prices and home loan rates to get slightly worse before they get better. Chart: Fannie Mae 6.0% Mortgage Bond (Friday Oct 05, 2007)

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of October 08 – October 12 Date ET Economic Report For Estimate Actual Prior Impact Tue. October 09 02:00 FOMC Minutes 9/18       HIGH Wed. October 10 10:30 Crude Inventories 10/05 NA   1138K Moderate Thu. October 11 08:30 Jobless Claims (Initial) 10/06 315K   317K Moderate Thu. October 11 08:30 Balance of Trade Aug -$59.0B   -$59.2b Moderate Fri. October 12 08:30 Retail Sales Sept 0.2%   0.3% HIGH Fri. October 12 08:30 Retail Sales ex-auto Sept 0.3%   -0.4% HIGH Fri. October 12 08:30 Producer Price Index (PPI) Sept 0.4%   -1.4% Moderate Fri. October 12 08:30 Core Producer Price Index (PPI) Sept 0.2%   0.2% Moderate Fri. October 12 10:00 Consumer Sentiment Index (UoM) Aug 84.0   83.4 Moderate