With the spotlight this week still focused on the Federal Reserve, and whether or not the Fed will increase short term rates this year, all eyes were on the September Jobs Report.
The report was a disappointment with just 142,000 new jobs created. This number was well below the predicted expected job creations number of 205,000. Furthermore, July and August jobs were revised lower by a total of 59,000. The unemployment rate remained at 5.1%. However, the Labor Force Participation Rate, which measures the number of people in the labor pool, dropped to 62.40%, the lowest number since the early 1970’s. A bright spot in the September report was the U-6 number, which includes anyone who desires a full-time job, but cannot find one, which fell to 10%, the lowest reading since 2008.
Globally, central banks around the world continue to prime the pump to boost their economies. Foreign government officials have put a great deal of pressure on the Federal Reserve not to increase interest rates. This last jobs report may have convinced the Federal Reserve to keep short term rates at zero until 2016.
The Fed is in a tough spot: should they raise rates and hurt the global recovery, or, don’t raise rates and threaten to create another domestic bubble in riskier assets.
With the poor jobs number, and the 10 year trading under 2.00%, we are closely monitoring the bond market and are biased toward floating, albeit carefully.