Jobs Report Misses Bigly; Dollar, Yields Dive

For those interested in some context for this, you’re encouraged to review the full preview here, but suffice to say that Thursday’s ADP print had some folks suspecting that the NFP number would be a beat.

No such luck.

U.S. MAY PAYROLLS RISE 138,000, JOBLESS RATE FALLS TO 4.3% pic.twitter.com/r0TjXPQG08

— Heisenberg Report (@heisenbergrpt) June 2, 2017

And while the headline number is… well… the headline, it’s the AHE print that everyone (including the Fed) will be focused on and on that score, this wasn’t a complete disaster.

Here are the numbers:

• U.S. May Nonfarm Payrolls Rose 138k; Unemp. Rate at 4.3%
• Nonfarm payrolls forecast est. 182k, range 130k-245k from 84 economists surveyed
• Nonfarm payrolls, net revisions, subtracted 66k from prior two months
• Participation rate 62.7% vs prior 62.9%
• Avg. hourly earnings 0.2% m/m, est. 0.2%, prior 0.2%, Y/y 2.5%, prior 2.5% est. 2.6%
• Nonfarm private payrolls rose 147k vs prior 173k; est. 175k, range 120k-240k from 39 economists surveyed
• Manufacturing payrolls fell 1k after rising 11k in the prior month; economists estimated 5k, range 0k to 15k from 22 economists surveyed
• Unemployment rate 4.3% vs prior 4.4%; est. 4.4%, range 4.3%-4.5% from 77 economists surveyed
• Underemployment rate 8.4% vs prior 8.6%
• Change in household employment -233k vs prior 156k

And the knee-jerk:

Both the 10Y yield and the 30Y yield have breached their 200-day moving averages.

Via Bloomberg:

Treasuries rose after a report showed U.S. employers added fewer jobs in May than forecast, cooling expectations for additional Federal Reserve rate hikes beyond this month. The Labor Department said the U.S. gained 138,000 jobs in May, compared with the median prediction of 182,000 in a Bloomberg survey, and a whisper number among traders of 200,000.

• Benchmark 10-year Treasuries yielded 2.18 percent as of 8:34am
• Leading into the data, USD rates volatility showed muted market impact expected, with just ~5.5bp of volatility priced in; odds of a June hike were about 90% based on 1st Fed dated OIS and 0.91% Fed effective rate, having ticked higher after Thursday’s ADP report
• Beyond headline number, average hourly earnings 0.2% MoM, in line with Bloomberg estimate, while unemployment rate was 4.3% vs 4.4% Bloomberg estimate
• Heading into the meeting, latest CFTC data reflected more balanced positioning among speculators, who now sit near neutral positioning in Treasuries; heavy eurodollar short base had been reduced while longs further out the curve, notably in 10-year futures, were at highest since 2007