The market is opening up pretty much unchanged from yesterday’s close. This would normally be a boring start to what is always an exhilarating Market Update but what makes this quiet morning worthy of mention is that we got the monthly NFP report @ 8:30 which as we all know is the Granddaddy of them all (think Keith Jackson here). This is because the number was definitely a strong number but close enough to the consensus and quite frankly there is a lot more going on out there and the report, dare I say, has become less significant. You almost get the feel that the market just wants to move on and focus on the next thing.
It is all part of the attention deficit disorder that most if not all traders likely possess. This has been the trend over the last several reports where it comes out, gets quickly digested, there is a marginal market move, trading levels return to the pre-number release and we move on. However here are the highlights worth mentioning:
- NFP increased 227k in February
- There was revision to both the January and December numbers resulting in a +61k improvement
- The unemployment rate remain unchanged @ 8.3%
- Government jobs lost 6k in Feb
- The participation rate increased to 63.9% from 63.7%
- Average hourly earnings rose a mere .1%
Something things worth noting:
- The participation rate did increase but the unemployment rate remained unchanged. This shows that those who entered the workforce found jobs.
- The average hourly earnings only rose .1%. This indicates that the strong job growth is highly weighted in lower paying jobs.
- The job growth is happening in the private sector as shown by the drop in Government jobs. This is always a great sign because it shows true job growth as opposed to padding the bureaucratic and inefficient Government payroll.
Let’s move on to a very disturbing story that hit yesterday morning. For those of you who are kind enough to regularly read these Market Updates than you know how I did not understand why our lawmakers aligned the payroll tax deduction with an increase in the g-fee. It just did not make sense to me that borrowers who are taking out new mortgages should pay for payroll tax deductions. I felt this was totally against the intended use of the g-fee which is to properly allow the agencies to generate reserves for future losses on loans. My opinion is not unique as the MBA venomously opposed the move but were obviously not successful. I felt it would open up a can of worms. Well it did not take long for some insane US Senators (Mary Landrieu, D-La & Richard Shelby, R-Ala,) to push for a bill that would extend the increase another year but instead of the 10bps it would be 7.5bps.
Sounds good right?? But get this… the reason would not be for continuing the payroll tax deductions that help all US citizens but the money would be used to help pay for continued cleanup from the British Petroleum Gulf Coast oil spill. Now I was very disturbed like most people by what happened there but I am equally disturbed that lawmakers are already tapping into this newfound method of taxation. What an easy way to pay for something by generating money thru a source that most voters have no clue about and, I hate to say, most mortgage professionals do not understand either. It is like they discovered gold mines in the valleys of California. There is a zero expectation that this will get passed so there is no need to panic. However if one thinks that the Government will not use an increase in the g-fee again to fund a political nugget (sticking with the gold theme) then they are just as crazy as the Jet fan who thinks Payton Manning will lower his standards by allowing Rex Ryan to be his coach.
Have a good weekend.