Mortgage Blog - February 6, 2023
Stocks and Mortgage Bonds are both lower to start the week after tough central bank talks from the Bank of England and European Central Bank.
Both the ECB and BOE said that the risk of overtightening is dwarfed by the risk of doing too little. These comments come on the heels of the "much stronger" than expected BLS Jobs Report from the US. And this is important, as the US is the engine of the global economy. But their commentary is based on misunderstanding the US Data.
The BLS Jobs Report showed 517,000 job creations in January, blowing out estimates but there were large seasonal adjustments, population controls, and new benchmarks. When removing the population controls, the household survey would not have shown 894,000 job creations, but rather would have only shown 84,000. Additionally, the unemployment rate would not have improved from 3.5% to 3.4%.
But there's more - non-seasonally adjusted data showed 2.5M job losses, but after seasonal adjustments, it was revised to a positive 517,000. The biggest anomaly, perhaps, was that a 471k plunge in the retail sector translated into a +30k seasonally-adjusted run-up, the best number since August - even though retail sales have slid in three of the past four months.
The BLS report was also in stark contrast to other data we are seeing - ADP was only 106,000 job creations in January, the weakest in 2 years, while BLS was the strongest in the last 6 months.
The Week Ahead:
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