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How the Bond Markets React It seems to be all about patience - not to short change all of the other worries plaguing the bond markets of late and that includes the jobs report watch which has become the number to wait for all month. That wait will be over Friday as the April number is released.
The April jobs report as released by the Bureau of Labor Statistics appears to be less optimistically estimated than the previous month and will probably be revised even after the report appears on Friday. March's 308,000 gain in jobs was shown to be largely made up of part time jobs taken by folks who were no longer able to collect benefits. Another disturbing number surfaced during that month and mentioned by the Fed chairman during his visit to Capitol Hill was the jettisoning of 85,000 unemployed Americans from the benefits program each week of that month - which means that we actually had a net job loss of 34,000. April's best guess is around 150,000, which would also be a net loss if the same amount of folks lose their benefits in April as in the previous month.
If the jobs number comes in at less than 125,000, expect Greenspan to do nothing about raising the short term interest rate. And that would add salt to the growing wound in the job market.
While we are on the subject of jobs, in a largely symbolic move, the President appointed Albert Frink Jr. as the new assistant secretary of Commerce. He has been hired to stop the loss of jobs in manufacturing. This should prove no easy task. That industry has been in a jobs decline since the late 70's with no real hope that those same jobs will return to those who lost them. In many instances, over that two plus decade span, new jobs were created, but since Bush has taken office, the industry began to shed their workers at an alarming rate. Many of these workers were involved in the export trade - the production of goods destined for overseas markets. Instead, during Mr. Bush's first three years in office, our best export has been our ability to borrow money, while these workers, a total of 1.6 million found no chance or effort to save their jobs. Little likelihood that Mr. Frink will have any impact.
There is growing sentiment among traders and spoken about out loud by the Oracle of Omaha, Warren Buffet at his annual shareholder meeting, that the Fed chairman, Alan Greenspan has waited too long. The low interest rate environment has accommodated far too much debt in Mr. Buffet's opinion as inflation begins to make inroads into the consumer's buying power.
If folks continue to be bullish in this environment, it has to be on a short term basis. If you are bullish on bonds, then you are probably optimistic that the Ten Year Treasury can hit 4.75% before too long.
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