Real Unemployment Rate is a Secret:
Stocks are moving higher for the 5th day in a row. Mortgage Bonds have lower news, the Senate passed a budget resolution. It allow Democrats to move forward with the process to pass a $1.9T relief bill without Republican support. The additional relief package would have to be paid for, which the Treasury would do by issuing Treasuries. Thus, adding more supply that has to be absorbed in the Bond market. It can also be viewed as inflationary.
Mortgage Bonds have since recovered after a weak jobs report, right back to the Fibonacci support level.
Jobs Report Breakdown:
The Bureau of Labor Statistics (BLS) reported that were 50,000 jobs in January. This number was almost exactly as expected. There were negative revisions to November and December, amounting to a negative 159,000.
The Unemployment improved from 6.7% to 6.3%, which is a sizable move lower. The unemployment rate is derived from the household survey, which has its own job creation component. Within the household survey there were 201,000 job creations, while the labor force decreased by 406,000. The number of unemployed people decreased by 586,000…but a lot of it is for the wrong reasons and due to more people leaving the labor force.
You may be asking yourself how is the unemployment rate at 6.3% when we are still 10M behind in jobs? We were pre-pandemic.
Those that are not able to look for work due to pandemic reasons and are still unemployed, are not counted. That number equates to 4.7M people. When you add them back in, the real unemployment number is 9.3%.
Additionally, there has been a lingering misclassification error. People who are classified as absent from work for other reasons, they are not marked as unemployed or on temporary layoff when they should have been. Without this error, the headline unemployment rate would have been 0.6% higher or 6.9%. The real unemployment rate, counting those that are not able to look for work due to pandemic reasons, would be at 9.9%.
The all in U6 Unemployment Rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, decreased from 11.7 to 11.1%.
Average hourly earnings increased from 5.1% to 5.4% year over year.
Average weekly earnings, which we focus on more, rose 6.4% to 7.5%. And, weekly earnings measures what people actually take home.
When looking at appreciation at roughly 10%, and weekly earnings up 7.5%, many in the media are saying that incomes are not keeping pace with appreciation. But, what they don’t realize is that you never use 100% of your income on your housing expense.
Because of this relationship, homes are more affordable than last year, even with the appreciation.