The report that gave rates a kick was the ADP Payroll data for December. ~300k new were created in December, whereas the expectation was for 100k. That’s a huge upside surprise, and markets react swiftly to surprises.
But the ADP report is taken with a grain of salt, in this case specifically because it doesn’t categorize temporary employees differently than full time ones. So, the numbers are assumed to be full of seasonal workers as you might expect when you realize that most retailers hire on extra help through the Christmas season.
Why You Want To Float
Tomorrow morning, before most of us are even awake, is the REAL jobs report, which contains official economic data on December jobs, and the unemployment rate. The market is highly sensitive to unemployment right now, and looking hard for anything to confirm or deny that we have an improving economy. 300k new jobs would be a significant step better than what we’ve been seeing in recent months, years even.
But if the report tomorrow helps shine a light on the ADP report, indicating that it was full of temporary (non-permanent) employees, then the market will likely want to exhale and undo the move it made yesterday, which should bump rates back down a little.
I’d be careful though, the larger trend in recent weeks has been for higher rates, driven by “less bad” economic data. So the sensitivity here is definitely to the upward direction with rates, even though I believe the probability favors a downward move.
With the volatility we’ve seen in recent months, be prepared for a report like this to move the market by .25% or so in either direction, if it misses expectations by a wide enough margin.
Want to talk about it? Send me an email and let me know what’s on your mind…