- NFP +38k vs +164k forecast. Big negative revisions
- Unemployment 4.7 vs 4.9, but also a drop in labor force participation rate
- Private Payrolls 25k vs 152k
- Big rally so far
This is why I say a big enough beat/miss in NFP will always produce an immediate, sizeable reaction in markets. We're definitely seeing one as this miss was more than "big enough" to shake things up. Even after we consider that this report automatically lost 37k payrolls from the Verizon strike, this is still a horribly weak result (38k + 37k would have only made for a 75k NFP print versus 164k expectations).
Traders don't care about the unemployment rate, even though the evening news will point to it as a positive offsetting factor. It came courtesy of lower labor force participation which means that fewer people said they were actively seeking employment.
As mentioned in the Day Ahead, there is so much trading structure built around NFP. The data sets certain balls in motion based on years of NFP-reaction strategy. Some of it--perhaps even 'much of
On a boring note, this snaps bond markets right back into the bigger picture triangle that looked like it was coming under threat after the FOMC Minutes 2 weeks ago.
10yr yields are 6bps lower, trading in the 1.73's at the moment and Fannie 3.0s are 10 ticks higher at 102-25, both well through their stronger short-term range boundaries. (The short term range can be seen in the white circle in the chart above).
