Bond Boost From Jobs Report Won't Last

Nevertheless, wages remain lofty relative the 15-year average of 3.2%, so there is nothing here to sustain a bond market rally, particularly given the upward pressure that the continued job growth puts on wages, and the legislative initiative to boost wages.

The length of the average workweek decreased a tenth of an hour to 33.8 hours. Although the decrease is small and fits within the normal monthly variability for the workweek, some will see the decrease as bullish for the bond market, because when taken in combination with the benign wage gain, the data indicate that income gains were restrained during the month. Again, I would rather emphasize the payroll trend and the strong trend in personal income.

Also lifting bonds at first is the increase in the jobless rate, which increased to 4.6% from 4.5% in December and the cycle low of 4.4% set in October, which was the lowest since May 2001. Here, too, the overall situation is bearish for the bond market, but the situation for the month is more pleasing to the eyes of the bond market.

Real Estate Sector Boosted

One very bearish element to the bond market of the January payroll report is the lack of any meaningful weakness in the housing-related sectors. While there was likely some amount of influence from the unseasonably warm temperatures that existed in early January when the payroll survey was conducted, the weakness in residential real estate seen thus far has been offset by strength in the nonresidential sector.