140,000 Jobs Lost Vs 1.10% 10-Year Yield



Today the BLS reported that 140,000 Americans had lost their jobs in the previous month, which really didn’t shock anyone, but this was the first jobs report that was negative in a while. Remember that the best 3 jobs reports ever recorded in U.S. history all came with $600 enhanced unemployment insurance. The notion that Americans are lazy people that don’t want to work is absurd and very disrespectful.

From BLS: https://www.bls.gov/news.release/pdf/empsit.pdf


Total nonfarm payroll employment declined by 140,000 in December, and the unemployment rate was unchanged at 6.7 percent, the U.S. Bureau of Labor Statistics reported today. The decline in payroll employment reflects the recent increase in coronavirus (COVID-19) cases and efforts to contain the pandemic. In December, job losses in leisure and hospitality and in private education were partially offset by gains in professional and business services, retail trade, and construction.

As you can see below the sectors of our economy that lost the most jobs are those impacted by Covid19 still.

From BLS: https://www.bls.gov/charts/employment-situation/employment-by-industry-monthly-changes.htm


The U6 unemployment rate still shows that we have a lot of work ahead of us to get back to January and February 2020 levels. Once this gets below 8%, we have made some real progress as we all want the same thing, a tighter labor market.

From Advisor Perspective:
https://www.advisorperspectives.com/dshort/updates/2021/01/08/december-jobs-report-140k-jobs-lost-unemployment-rate-remains-at-6-7



Why is the 10-year yield at 1.10% as I write this article right now? Higher bond yields mean the bond market believes the economy is getting better for those who don’t know, and inflation expectation is rising as it should with better demand.

My AB (America is Back) economic model, written for 2020, only needed the 10-year yield to get back to 1% last year. We hit 0.99% in December. However, as I discussed back then, we really want to have the 10-year yield range between 1.33%-1.60%. This wasn’t a 2020 storyline, but for 2021, if we can’t get the 10-year yield to 1.33%, we didn’t spend enough money, or the vaccination rollout went badly.

https://loganmohtashami.com/2020/12/09/america-is-back-the-final-economic-update/

The theme is the light at the end of the tunnel, and after the recent Senate run-off election, the odds favor more disaster relief, faster than before. This explains the bond market selling off this week from below 0.95% to a high of 1.13% today.





Can yields fall back down? Yes, they can. We haven’t had a 10% plus correction in the stock market since March. Also, bond yields can fall when you have many headline risks, Covid19 risk, and any other drama type. Plus, we can’t run our economy anywhere near full capacity while Covid19 is infecting and killing Americans every day. 4,033 Americans died yesterday, and the 7-day average is running at 2,758 deaths per day.


From Calculated Risk:
https://www.calculatedriskblog.com/2021/01/january-7-covid-19-test-results-record.html



As horrible as the data is above. As a country, we have learned to consume goods and services with an active virus infecting and killing people every day, which is why the economic data has gotten better. Also, we had major disaster relief when the county needed it the most. With the vaccination process started and more disaster relief on its way. You can see why the bond market is acting the way it is this week and today. We still have a long way to go, but we see the light at the tunnel’s end. Have a safe weekend!

Logan Mohtashami is a Lead Analyst for Housing Wire, financial writer, and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami, now retired, was a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987.