The clarification of the Fed’s position on Quantitative Easing and the health of the economy (via their minutes and Bernanke’s statement from Jackson Hole) exposed Treasuries to the economic data with less support than they had just a week ago. Sure enough, the ISM report of manufacturing activity was stronger-than-expected yesterday sparking a rally in stocks and barrage of selling in bonds.
This morning new claims for unemployment benefits were reported as falling slightly last week, however, continuing claims remain at elevated levels. In addition to this report, worker productivity in the second quarter fell 1.8% while unit labor costs rose 1.1%. The Fed takes a keen interest in labor costs as these costs are a key measure of inflation.
The result of this weak data is unexpected as investors continue to sell bonds, driving the yield on the 10 year note back to 2.63%. Mortgage pricing is worse again by approximately .125% to .250%.
As usual, the first Friday of each month, the Labor Department releases the jobs data for the previous month. Tomorrow’s release is expected to show the labor market lost 100,000 jobs, while private sector hiring increased 41,000. The unemployment rate is forecast to rise from 9.50% to 9.60%.
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