The US jobs number was no great shakes:
“This number isn’t an earth-shaker,” John Manley, who helps oversee $222.7 billion as chief equity strategist for Wells Fargo Funds Management in New York, said in a phone interview. “It is debatable if it was good or bad. It was OK. The number still indicates the Fed is going to be there for a while, that is not bad.”
The 162,000 increase in payrolls last month was the smallest in four months and followed a revised 188,000 rise in June that was less than initially estimated, Labor Department figures showed today in Washington. The median forecast of 93 economists surveyed by Bloomberg called for a 185,000 gain. Workers spent fewer hours on the job and hourly earnings fell for the first time since October.
The unemployment rate was forecast to drop to 7.5 percent from 7.6 percent, according to the Bloomberg survey median.
Matthew Klein of Bloomberg points out:
The BLS report also tells us what kinds of jobs were added. Here again, the news is not particularly encouraging. More than half of the jobs added last month were either in retail trade or “food services and drinking places.” People employed in those sectors tend to have much shorter work weeks and much lower hourly wages than everyone else.
Even worse, a recent paper by Canadian researchers suggests that many of the people taking these jobs are relatively over-educated. The authors argue that, since 2000, globalization and technological advancement have reduced the demand for “high-skilled” workers. Desperate for employment, these workers ended up pushing the “lower-skilled” out of the job market entirely. This may help explain why the share of people aged 25 to 54 counted as being in the labor force has plunged by 3.5 percentage points since 2000.
The quality of jobs being created is probably connected to the depressing performance of incomes and the decline in the work week. Hourly pay has grown by just 1.9 percent over the past 12 months — basically unchanged since the end of 2009. The data from the BEA tell a similar story. Real after-tax incomes fell in June. Americans still have less purchasing power than they did in November 2012. Our standard of living has barely improved over the past year.
There’s some good, if politically motivated discussion at hotair.com.
Assiduous Reader nervousone begs me to point out:
James, if you’re going to mention the July number in an upcoming comment, show them you’re ahead of the game and make me proud . . . please include this [final paragraph] from todays release,
“The change in total nonfarm payroll employment for May was revised from +195,000 to +176,000, and the change for June was revised from +195,000 to +188,000.”
No one else will mention it . . . or trade on it (well almost no one else).
The twenty minutes bracketting the jobs announcement is entertaining. Every cowboy in the world is placing a bet on what the number will be and how the market will react to it, then reversing the trade a few minutes afterwards, taking whatever P&L there might be – so there’s lots of volume and the dealers jack up their spreads.
Of perhaps more importance than the revisions is the quality of the jobs. Lots of times they’re part-time, or all government, or (as in the current case) largely crummy jobs … there’s a lot more to the number than the headline.
I’m sure that somebody, somewhere, has a proper econometric model that incorporates the data – all the data – in a sensible manner (possibly feeding into a Taylor Rule based system) whereby a sensible person could actually trade at prices that made sense, once the spreads returned to normal; but in such a rational system, the jobs number would (a) be only one of many inputs, and (b) be foreshadowed by the ADP number anyway. I have, however, never seen such a system.
In Canada, those with jobs are buying houses:
Sales of existing homes in both Toronto and Vancouver, the country’s two most precarious housing markets, hit their highest level for the month of July since 2009 last month.
Greater Vancouver saw a 40.4 per cent year-over-year increase in sales over the Multiple Listing Service, while the Greater Toronto Area saw a 16-per-cent increase.
…
The Toronto Real Estate Board, meanwhile, noted that last month was the third highest July on record for the city, and pointed to an eight per cent year-over-year increase in the average selling price, to $513,246, as evidence that market conditions are tightening (though averages can be skewed by the types of homes that are selling).
There’s a little reaction to the politicization of the next Fed appointment:
Since the president in an interview with Charlie Rose June 16 indicated he wouldn’t reappoint Federal Reserve Chairman Ben Bernanke, intrigue over his successor has grown to a level where Fed experts and former administration officials are concerned that the selection process is so political it could have long-lasting ramifications for the markets, the eventual nominee’s confirmation hearings and the Fed as an institution.
“What’s really unfortunate is how public and polarized this debate has gotten,” Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., the world’s biggest mutual fund, said in an interview on Bloomberg Television. “This has an impact for the market going forward.”
The president and White House officials have spent the last week trying to defuse an escalating public contest between Lawrence Summers, Obama’s former top economic adviser, and Janet Yellen, the Fed’s current Vice Chair.
Confronted by a chorus of concerns about Summers — and letters from House and Senate Democrats voicing support for Yellen — Obama on Capitol Hill told his party’s lawmakers on July 31 that he has interviewed “lots” of candidates. He threw a new name into the mix, former Fed Vice Chair Donald Kohn, as he and his aides tried to buy some time, saying the choice was weeks away and not until autumn.
The post-mortems on the Fabulous Fab verdict are coming in:
Fabrice Tourre, the former Goldman Sachs Group Inc. (GS) vice president found liable for his role in a failed $1 billion investment, may have lost his case because jurors rejected his defense that as a junior employee he wasn’t primarily responsible for the transaction.
“Being 28 years old and one of several employees of Goldman Sachs isn’t a defense,” Tom Gorman, a former lawyer with the Securities and Exchange Commission’s Enforcement Division, who is now in private practice, said in an interview.
Tourre was a highly paid specialist working in a particular area who asked people to invest billions of dollars in a product he created, Gorman said.
I think the part “asked people to invest” part is a bit overstated, although technically true. He was a salesman. He had a product. Sold it. Big deal. It is the role of a Portfolio Manager to select good stuff from oodles and oodles of bad they are offered every single day.
Megan McArdle of Bloomberg has a good perspective:
The picture you get from reading about the testimony in the Fabrice “Fabulous Fab” Tourre case is of a bunch of people behaving like idiots. Tourre appears willing to say anything to potential buyers to close the deal. The people buying his mortgage bonds don’t inquire as to whether hedge-funder John Paulson’s “equity perspective” is equivalent to an “equity investment”; they just assume it is, and give Fab Tourre a bunch of money.
But was all this illegal? My impression from watching coverage of the case was that the Securities and Exchange Commission’s case against Tourre was pretty weak. That’s why his lawyers rested without calling any witnesses. And these defenders aren’t arrogant idiots; one securities lawyer I know says they’re “top notch.”
So why did the jury find against him? It’s not exactly clear. “At the end of the day, he probably could have done the right thing,” one, a 61-year-old school principal, said. “But he chose to play the game.”
…
One hears it over and over, in writing about the financial crisis: “Why isn’t someone in jail?” Fab Tourre is someone. To be sure, he isn’t a very important someone. And he’s not actually going to jail, because this was a civil trial. But we can’t indict “the game.” Fab Tourre may have been the closest substitute we could find.
It was a day of modest declines in the Canadian preferred share market, with PerpetualDiscounts off 4bp, FixedResets down 5bp and DeemedRetractibles losing 6bp. Volatility was relatively high, but with no clear pattern. Volume was very low, since many hard-working participants in the highest paid profession on earth took the afternoon off ahead of the long weekend; this provides more time to complain about the appalling work ethic prevalent among bar and restaurant staff.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.4811 % | 2,622.0 |
| FixedFloater | 4.10 % | 3.40 % | 32,085 | 18.57 | 1 | 0.0000 % | 4,046.5 |
| Floater | 2.56 % | 2.85 % | 78,504 | 20.10 | 5 | 0.4811 % | 2,831.0 |
| OpRet | 4.60 % | 2.28 % | 79,200 | 0.65 | 3 | -0.2296 % | 2,620.7 |
| SplitShare | 4.69 % | 4.94 % | 59,110 | 4.16 | 6 | 0.0799 % | 2,954.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2296 % | 2,396.4 |
| Perpetual-Premium | 5.67 % | 5.16 % | 90,720 | 0.73 | 12 | 0.0579 % | 2,281.7 |
| Perpetual-Discount | 5.41 % | 5.50 % | 151,332 | 14.60 | 25 | -0.0427 % | 2,377.9 |
| FixedReset | 4.95 % | 3.65 % | 230,146 | 3.75 | 85 | -0.0549 % | 2,464.9 |
| Deemed-Retractible | 5.12 % | 4.91 % | 184,633 | 7.01 | 43 | -0.0590 % | 2,361.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CU.PR.F | Perpetual-Discount | -1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-02 Maturity Price : 21.51 Evaluated at bid price : 21.81 Bid-YTW : 5.23 % |
| BAM.PF.A | FixedReset | -1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-02 Maturity Price : 23.15 Evaluated at bid price : 25.01 Bid-YTW : 4.53 % |
| CU.PR.E | Perpetual-Discount | -1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-02 Maturity Price : 23.49 Evaluated at bid price : 23.83 Bid-YTW : 5.21 % |
| FTS.PR.G | FixedReset | -1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-02 Maturity Price : 22.64 Evaluated at bid price : 23.71 Bid-YTW : 4.07 % |
| TRP.PR.D | FixedReset | 1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-02 Maturity Price : 23.10 Evaluated at bid price : 24.95 Bid-YTW : 3.99 % |
| MFC.PR.F | FixedReset | 1.26 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.20 Bid-YTW : 3.86 % |
| BAM.PR.B | Floater | 1.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-02 Maturity Price : 18.54 Evaluated at bid price : 18.54 Bid-YTW : 2.85 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.Q | FixedReset | 36,135 | RBC sold 24,000 to Anonymous at 24.95. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.90 Bid-YTW : 3.55 % |
| BNS.PR.Z | FixedReset | 29,833 | National crossed 20,000 at 23.90. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.89 Bid-YTW : 3.92 % |
| TD.PR.Q | Deemed-Retractible | 28,620 | TD crossed 25,000 at 25.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.80 Bid-YTW : 4.63 % |
| ENB.PR.B | FixedReset | 26,986 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-02 Maturity Price : 23.25 Evaluated at bid price : 24.95 Bid-YTW : 4.06 % |
| RY.PR.P | FixedReset | 26,340 | RBC bought 10,000 from CIBC at 25.37. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 25.32 Bid-YTW : 3.27 % |
| ENB.PR.Y | FixedReset | 25,550 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-08-02 Maturity Price : 22.93 Evaluated at bid price : 24.51 Bid-YTW : 4.11 % |
| There were 14 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRI.PR.B | Floater | Quote: 23.31 – 24.50 Spot Rate : 1.1900 Average : 0.9570 YTW SCENARIO |
| BAM.PR.J | OpRet | Quote: 26.64 – 27.18 Spot Rate : 0.5400 Average : 0.3445 YTW SCENARIO |
| HSB.PR.C | Deemed-Retractible | Quote: 25.02 – 25.45 Spot Rate : 0.4300 Average : 0.2915 YTW SCENARIO |
| GWO.PR.Q | Deemed-Retractible | Quote: 24.53 – 24.87 Spot Rate : 0.3400 Average : 0.2350 YTW SCENARIO |
| CU.PR.C | FixedReset | Quote: 25.55 – 25.90 Spot Rate : 0.3500 Average : 0.2458 YTW SCENARIO |
| ENB.PR.D | FixedReset | Quote: 24.61 – 24.85 Spot Rate : 0.2400 Average : 0.1443 YTW SCENARIO |
ah yes, more journalism worth reading! . . . I think you should maybe change the title of this forum from Prefblog to . . . CommonSenseBlog!
now, what about today? markets tanking, gold tanking, oil tanking, . . . the only thing that’s up are . . . bond yields . . . therefore, probably not a wonderful day for prefs . . . how come? . . . need an extensive situation analysis? not really . . .
here’s the whole reason why:
WASHINGTON (MarketWatch)– The Federal Reserve is “quite likely” to begin to slow down the pace of its $85 billion a-month asset purchase program “starting later this year,” said Charles Evans, the president of the Chicago Fed Bank, on Tuesday. The economic fundamentals “are actually really better” and growth in the second half of the year should accelerate to a 2.5% annual growth rate, he said. Evans said he could not predict exactly at which meeting the Fed would start to taper. “We need stronger evidence of accelerating growth, a little more momentum,” he said. “We’re not far from that,” he added.
that’s right . . . junior Fed minion gum flapping once again (I wonder what part of the employment numbers miss this moron didn’t understand, anyway)
I would hesitate before calling a Fed bank president a minion. My career is in the wrong field and the wrong country to dream of such a position, but if I was eligible I would consider it a capstone to an illustrious career to be a Fed Bank president. Those guys are much better than the clowns we’ve been getting lately in Canada.
Hell, I’d be honoured just to have the words “James Hymas” and “Fed bank president” in the same sentence, never mind actually getting the thing.
I also believe – and this is pure speculation – that all these Fed Governor speeches are carefully choreographed. I don’t think it’s just guys shooting off their mouths, I think it’s a few quiet conversations along the lines of “Charlie, the market’s not getting the right message here. Why don’t you say in public what you were saying in private?”
I will admit that there has been increased politicization of the Governorship, what with Yellen having two X chromosomes and all, but Yellen’s a decent candidate … just not, I think, quite superlative enough. I mean hell, Summers has practiced for the job by being the Secretary of the Treasury of the United Fucken States of America.
ah . . . the voice of reason, as always!
I might agree that careful choreography could be in play; just badly executed with less than the desired effect (such as yesterday). However, it seems that Bernanke spends most of his microphone time negating the doom and gloom positions of his [ahem] junior president wannabes. Also, is it not the actual job of the Federal Reserve to actually shape economic policy through action, as opposed to constantly attempting to jawbone market behaviour through the delivery of propaganda?
I think you would be good for the job, James, but if they don’t see the light and make you an offer, I’d give the Bernanke job to Fred Ketchen before I gave it to any of the regionals!
Remember that Bernanke is Chairman and speaks for the FOMC and therefore will be taking the majority view. I will have to ask more dedicated Fed watchers than myself whether a Fed Chairman has EVER dissented from the FOMC concensus … I suspect that if it happened more than once, or perhaps even just once, he’d be honour-bound to resign.
But these guys have been doing this stuff all their lives and know it’s complicated. They don’t just mind dissent, they encourage dissent, the same way the Vatican appoints a Devil’s Advocate when considering sainthood. That helps ensure they don’t miss anything big and forces them to address the weak parts of their arguments.
These guys are heavy hitters and all have rock-solid reputations in their own field, whether it’s commercial banking, fed policy, academia or whatever. If they think the emperor has no clothes – they’re going to tell him!
It’s not like Canada, where not only is consensus culturally valued, but official committees of this nature are stacked with second-rate appointees who know they’re in way over their heads, who know that their only talent is for sucking arse and who therefore address all problems with a smile and nod.
No doubt that these guys are pretty qualifed to get appointed at that level, and I agree that the Canadian version is a little less [ahem] credible.
It just kind of annoys me that these guys are either hawkish, or dovish, and almost always maintain their devoted stance regardless of the situation. Richard Lacker (a non-voting FOMC member) of Virginia for example used to spend 100% of his mike time preaching the attributes of raising rates . . . no matter what. Now of course, all he can do is beg for fast “tapering”, but his position is solid hawk, kill the evil inflation enemy . . . doesn’t matter what the reality is. Yellen, I believe is pretty much chanting the identical one way mantra.
I’m pretty sure that Greenspan back in about 1992, was supposed to follow media, and FOMC, consensus to cut rates by a quarter, and he shocked the world by cutting by a half instead. I might be off a bit with the year there, but that would be about the only time the chairman did something “else”. But James, please remember that if the chairman follows FOMC consensus, the FOMC almost exclusively follows the media consensus.
These guys, as heavy hitters as they may be, really don’t . . . do . . . much of anything (other than give speeches!).