The Day Ahead: Official Jobs Report, Bernanke, Consumer Credit
Benchmark Treasury yields are a few bps higher and equity futures are slightly improved as investors wait for the December nonfarm payrolls employment report.
The 10 year Treasury note is -8/32 at 93-09 at 3.435% (+3.2bps) and the Fannie Mae 4.5 MBS coupon is UNCH at 102-03.
S&P 500 futures are 2 points higher at 1,268.20 and Dow futures are up 20 points at 11,666. The Dow has gained 120 points this week, or 1.03%, despite a 26 point loss yesterday.
All eyes are on the employment report this morning. The four-week average for initial jobless claims fell to 411k yesterday, the lowest in more than two years. And the ADP report a day earlier reported a private payroll gain of nearly 300k jobs ― the most in a decade.
Key Events Today:
8:30 ― The December Employment Report is expected to show the economy added 126k new jobs to the economy last month, including 140k new private-sector jobs. (Government jobs are expected to be depressed, bringing the headline figure down).
Forecasts for the headline figure ranged from 90k to 225k according to 32 economists polled last week by Thomson Reuters. Since Wednesday’s ADP employment report ― which reported 297k private payroll gains in the month ― estimates have jumped upwards.
“The surprisingly large increase very likely reflected seasonal adjustment distortions rather than a sudden swing in job market conditions,” said economists at Nomura Global Economics.
This morning’s report follows a disappointing November survey in which a net 39k jobs were created, including just 50k private jobs.
Some economists believe that figure could see upward revisions, based on better data from jobless claims, November’s ISM employment components, and the last two ADP reports.
Economists at BTMU, for instance, wrote: “The November payroll report was very disappointing, showing only +39K jobs were created over the month. But the stock market shrugged it off because other labor market indicators leading up to the report had been positive. We expect November’s job count to get an upward revision.”
Looking to December’s report, economists at IHS Global Insight said firms “are becoming more confident in the expansion, and hiring is improving as a result.”
“Continuing declines in initial unemployment insurance claims indicate that the very weak November employment report was an aberration,” they wrote. “We expect payroll employment gains to improve to 150,000 in December from just 39,000 in November, and the unemployment rate to edge down to 9.7% from 9.8%.”
10:00 ― Ben Bernanke, chairman of the Federal Reserve, testifies to the Senate Budget Committee on monetary and fiscal policy.
4:30 ― The Fed’s vice chairwoman, Janet Yellen, and several Fed Bank presidents including Charles Evans from Chicago, speak to the American Economic Association convention in Denver.
3:00 ― Consumer Credit is expected to expand for the third consecutive month in November. Economists forecast a $1 billion increase, following a $3.4 billion expansion in October. However, the string of increases is rather misleading. Consumer debt shrunk $52 billion in the first 10 months of the year, and the recent increases are the result of federal student loans.
“Consumer credit is expected to gradually make its way back into positive territory,” wrote economists at IHS Global Insight after the October report. “However, it would not be a surprise to see a string of consumer credit declines in the upcoming months as the household deleveraging process continues. Holiday sales are expected to be up 4.5% versus last year, but consumer prudence will remain key in determining whether purchases are made on a cash or credit basis.”