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Low Unemployment Drives Bond Yields Higher

Oct. 09, 2018 1:20 PM ETSPY, QQQ, BND, AGG, IVV, DIA2 Comments
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  • The September jobs report showed 134,000 new jobs were created.
  • Unemployment fell to 3.7 percent - the lowest since 1969.
  • Bond yields now hover around 3.23 percent, and financial markets appear volatile.
  • Ten-year treasuries below 4 percent is bullish for stocks, in my opinion. This will likely be a stock picker's market going forward.
  • Looking for more? I update all of my investing ideas and strategies to members of Shocking The Street. Start your free trial today »

The September 2018 jobs report showed 134,000 new jobs vs. economists' expectations of 185,000 according to a Bloomberg survey. Jobs also were much lower than the 270,000 revised figure for the month of August. Transportation and warehousing jobs were up 20,000 in September, following a 24,000 increase in August. Job gains in this sector have increased by 174,000 over the year. This rise in transportation jobs likely signals more goods are being shipped cross country, and the vital signs of the economy are improving. Economists have intimated a spike in purchases occurred in expectation of a trade war with China. Whether this activity will abate and dampen transportation activity in the future remains to be seen.

Jobs related to professional and business services rose 54,000, construction jobs rose 23,000, and leisure and hospitality jobs fell by 17,000. Some attributed the decline in leisure and hospitality to the impact of Hurricane Florence. Manufacturing jobs rose by 18,000, which is a good thing since these jobs tend to come with higher wages. President Trump vowed to get manufacturing back on its feet and it appears to track. The question remains, "How much of it has been stimulus induced?"

Unemployment Rate Falls To 3.7 Percent

The unemployment rate fell to 3.7 percent, down from the 3.9 percent reported in August and 4.2 percent in the year-earlier period. This is the lowest rate of unemployment in almost 50 years.

Unemployment was as high at 10 percent in October 2009 and has trended lower ever since. In September 2015, it reached the 5 percent threshold - the rate economists consider full employment. A rate of 3.7 percent is almost surreal. It could portend an extremely strong economy and a rise in wages for workers to keep them from switching jobs.

Average hourly wages were $27.24, up 2.8

This article was written by

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The Shock Exchange has a B.A. in economics and MBA from a top 10 business school. He has over 10 years of M&A / corporate finance experience. Currently head the New York Shock Exchange, financial literacy program based in Brooklyn, NY.His book, "Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead", predicted pain ahead for the U.S. economy and financial markets.In 2014 the law firm of Kirby, McInerney, LLP brought a class action lawsuit against Molycorp, Inc. for "materially misleading statements" in its financial statements. Kirby, McInerney used investigative journalism from the Shock Exchange to buttress its case. That's the discipline the Shock Exchange brings to every situation he covers for SA.

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Comments (2)

I wonder how far bond yields have to rise before we get a bear market in stocks?
Shock Exchange profile picture

4% yields could crush the market.

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