More Jobs Created Than Expected, But Revisions Keep Markets In Line

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Today's Non-Farm Payrolls report showed that economy added 132,000 news jobs in November, exceeding the expectation figure 105,000. 

By itself, that will not push the markets over the Double Top.  That's because, in addition to October's figure's downward revision of 13,000 to 79,000 (14%), the average weekly earnings remained relatively flat (0.178% increase).  Wage inflation is a key inflation point and it remains contained.

With no blockbuster news this morning, markets are taking it all in stride, with a bias toward selling bonds (which causes rates to increase).

Prior to the release, the mortgage bond market was sitting at a Double Top -- a trading pattern in which the price of a security follows the shape of an "M" over time.  Prices were at the second peak, poised to head downwards.

When prices go south, the effective yields go north and that's why today's Non-Farm Payrolls report was so important.  If the Double Top pattern were to continue, bond prices will plummet and mortgage rates will jack higher.

Mortgage rate shoppers live to fight another day, although pricing will be slightly worse Friday than it was Thursday.

The next opportunity for the Double Top action will be Tuesday when the Federal Open Market Committee meets for the last time this year.  Although the FOMC won't likely raise the Federal Funds Rate from its current resting point of 5.250%, it will make a public statement that stays on theme. "We are vigilant against inflation and are data-dependent."

Except, the "data-dependent" thing is not 100% true.

Chicago Fed President Michael Moskow revealed in November that although the Fed worries about data-driven inflation, it also worries about emotion-driven inflation.  Listening to Moskow discuss the direct link between the two was nothing short of frightening.

Imagine this.  A member of the most influential economic policymaking group in the country says out loud (and I paraphrase):

When businesses think inflation is a threat to their bottom-line, they change the nature of their different business and that actually causes inflation to happen.  Therefore, part of the FOMC's role is to make pre-emptive policy changes to stop this behavior before it ever manifests itself. 

Ugh.  The economists are now psychiatrists.  At least today, business are feeling complacent about growth and that should temper expectations of inflation.

Expect mortgage rates to face slight upward pressure today and into the weekend.