Rates rose after this morning’s BLS report showed the economy added 243k non-farm payrolls in January, the most since April 2011 and beating expectations of 135-145k.

December was revised from 200k to 203k new jobs created and November was revised from 100k to 157k.

This figure doesn’t count actual people, it counts how many companies opened or closed, then uses that data to estimate the number of jobs gained or lost.

Unemployment dropped to 8.3% from 8.5% according to a different part of the jobs report called the ‘Household Survey’ which counts people. This is the lowest since February 2009.

Rates rise when mortgage bonds (MBS) sell, and today’s selling trend breaks a two month-theme. Up to today, MBS initially sell on better U.S. economic news like this, then recover. But we’re not recovering this morning since jobs were a definitive upside surprise.

The 3.5% Fannie Mae coupon—a key benchmark lenders use to price consumer rates—has been down as much as 52 basis points which translates into rates .125% to .25% higher if the selloff holds. But impending Eurozone trouble continue to temper selloffs to keep rates from spiking: 30yr fixed single family home loans to $417k look like they’ll still end the week below 4%.

More in WeeklyBasis recap/outlook tomorrow, and here’s a deeper dive on today’s numbers.
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Source:
BLS January Jobs Report

- Headline Nonfarm jobs was +243,000. Consensus was 135,000
- Unemployment Rate was 8.3% down from 8.5% in December 2011
- Average hourly wage $23.29 up from $23.24 in December 2011
- Average work week was 33.4 hours down from 33.7 in December 2011
- Private jobs were +257,000. Government jobs were -14,000

Reading beneath the surface:

-Good producing jobs were +81,000.

-The size of the civilian labor force rose from 153,887,000 to 154,395,000.

-The labor participation rate (percent of adult non-institutionalized population who are part of the labor force) fell to 63.7%. It was 64.2% a year ago.

This is the part I find interesting: according to the 4 week moving average of Initial Jobless Claims 1,511,000 people lost their jobs in the last 4 weeks. That normalizes to 1,637,000 lost jobs in a month (there are about 13 four-week periods in a 12 month year.) This is up from the previous month’s 1,617,000 lost jobs/month.

The question is this: if 1,637,000 people lost their jobs last month and we gained 243,000 jobs, how did that happen?

The answers are in the Household Survey segment of the jobs report.

In January 2012 BLS measured 4 sets of people entering or leaving the jobs market:

- Job losers and persons who completed temporary jobs was 7,321,000 down 281,000 from December’s Job Leavers and down 1,141,000 from January 2011.

-Job leavers was 939,000. This includes anyone who retired or voluntarialy left working. This was down 23,000 from previous month and up 25,000 from January 2011.

-Reentrants was 3,325,000. Reentrants are people who were looking for a job a found one. This was -74,000 from previous month and -26,000 from January 2011.

-New entrants were 1,337,000. These are unemployed persons who never worked before and who are entering the labor force for the first time. This was +61,000 from previous month and +84,000 from January 2011.

In summary: few people lost their jobs, fewer people left their jobs, more unemployed people got jobs, and more people entered the labor force for the first time.

The largest factor was that fewer people lost their jobs. The number of job losers each month is about 30 times the change in jobs. It may be the case that fewer temps were laid off. That would explain why initial jobless claims were up and job losers was down.

Fewer temps being laid off is an early sign of recovery in the jobs market. One concern is that inventory buildup continues to outpace consumer spending and unless consumer spending picks up, some of the gains seen here will be given back.

Rates rise when mortgage bonds (MBS) sell, and today’s trend continues a two month-theme: Mortgages sell right after better economic releases and EU aid news, then recover. The 3.5% Fannie Mae coupon—a key benchmark lenders use to price consumer rates—was down 30 basis points in early trading and is now up 23 basis points. Impending EU trouble (and MBS-focused QE3 rumors) have tempered—and reversed—selloffs to keep rates from spiking from current record-low levels.

More in WeeklyBasis recap/outlook tomorrow, and here’s a deeper dive on today’s numbers.

Reading beneath the surface:

-Good producing jobs were +48,000. The largest gain in a while.

-The size of the civilian labor force fell from 153,937,000 to 153,887,000.

-The labor participation rate (percent of adult non-institutionalized population who are part of the labor force) stayed at 64.0%. It was 64.3% a year ago.

This is the part I find interesting: according to the 4 week moving average of Initial Jobless Claims 1,493,000 people lost their jobs in the last 4 weeks. That normalizes to 1,617,000 lost jobs in a month (there are about 13 4 week periods in a 12 month year.)

The question is this: if 1,617,000 people lost their jobs last month and we gained 200,000 jobs, how did that happen? The answers are in the Household Survey.

In December 2011 BLS measured 4 sets of people entering or leaving the jobs market:

- Job losers and persons who completed temporary jobs was 7,602,000 (up 3,000) from previous month and down 1,275,000 from December 2010.

-Job leavers was 953,000. This includes anyone who retired or voluntarialy left working. This was -52,000 from previous month and +33,000 from December 2010.

-Reentrants was 3,399,000. Reentrants are people who were looking for a job a found one. This was +44,000 from previous month and -7,000 from December 2010.

-New entrants were 1,280,000. Unemployed persons who never worked before and who are entering the labor force for the first time. This was +4,00 from previous month and -26,000 from December 2010.

What does all of this mean? It means that the economic and social factors associated with the jobs market are vastly more complex than just the 2 pieces of data: change in jobs and unemployment rate. There are demographic factors (people retiring and young people entering the jobs market) which are as significant as the changes in the set of people continually part of the labor force.

Analysis of the monthly report is but another example of the unwillingness of the media to try to understand and explain a complex topic. The average newspaper has 10 times more analysis of a football game than it does of the jobs market.

Rates rise when mortgage bonds (MBS) sell, and today’s trend continues a theme all week: mortgages sell sharply right after ok economic releases and EU aid news, then recover. The 3.5% Fannie Mae coupon—a key benchmark lenders use to price consumer rates—was down 38 basis points and is now up 6 basis points. Long trading session ahead, but so far impending EU trouble and potential MBS-focused QE3 have tempered—and reversed—selloffs to keep rates from spiking. If this morning’s MBS levels hold, my outlook for rates net up slightly on the week will also hold. More in WeeklyBasis recap/outlook tomorrow.

We should pay attention to the labor participation rate not the unemployment rate because labor participation drives the economy. The labor participation rate (Civilian Labor Force/Civilian Noninstitutional Adult Population on this table) has dropped 0.5% in the past year.

Last month 120,000 found work and 315,000 gave up looking for a job. If you think that is good, feel free to celebrate but do not invite me to the party.

Average Hourly Earnings were down -0.1% and the Average Work Week was flat at 34.3 hours.

Unemployment dropped 9% from 9.1% according to a different part of the jobs report called the ‘Household Survey’ which counts people. More in WeeklyBasis recap tomorrow. Jobs charts below.

I want to note once again that at the end of this year we are likely to see a drop in the unemployment rate as the 99 weeks of unemployment benefits expires and people drop out of the workforce.

Also note that the number of people working is determined by accurate data from real companies. The number of people in the labor force is determined by Household Survey and people’s description of their labor status. For example, this months Household Survey had 70,000 few people working part time who were looking for full time work.

Rather that look at the defective unemployment rate, what we should be observing is the labor participation rate. Read this article by Alan Krueger . Alan has been nominated to head Obama’s Council of Economic Advisors.

However you want to slice, dice, parse or spin it the fact is that this is an extremely poor jobs performance for an economy which is in the 10th quarter of recovery from the “Great Recession.”

But don’t worry, someone’s profiting from the misery:

Last month Hallmark released a new line of job-loss sympathy cards aimed at providing encouragement to those who are struggling in this tough economy. The popular humor ecard website Someecards started creating unemployment-themed cards back in 2008. “It felt like an opportunity to make people laugh and connect while they are going through tough financial times,” says Brook Lundy, co-founder and head writer at Someecards. “People can express sympathy while maintaining a sense of humor.”

Derek McCracken, creative director with Hallmark Greeting Cards says the idea came not from Hallmark but from the consumers themselves. “They sent us letters. They phoned it in. They asked their retailers, you know, in their neighborhood, where do I find a card that says this?” he told NPR.

Likely story Mr. McCracken. But a well written card can certainly help, so I can’t bust on the card companies too much.

I remember I got a card back in 1997 when I was in the depths of hating a horrible job. It was a tissue saying this to a roll of toilet paper: “So that’s what I do. I can’t think of anything worse. What about you? What do you do?”

I obviously still remember it all these years later, so they were doing something right.
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Further reference:
-Hallmark Capitalizes On Unemployment
-Jobs & broader market preview this week
-Dates Recession Began/Ended

Most telling is that this dismal data is now regarded as positive. We are in an era of diminished expectations. The day started with equities moving up and Treasuries & mortgage bonds selling. When monthly jobs growth averages 200,000/month for a three month period, the economy will be growing. Not growing by a lot, but growing.