January 9, 2009
Treasury prices are mixed again this morning with prices on the front end higher and prices on the back-end lower. Three month LIBOR declined nine basis points to 1.26%, the biggest daily decline in three weeks. The decline is leading some to believe that all of the excess liquidity pumped into the system by the central banks and the near-zero percent returns for Funds is pushing some banks to take more risk.
The story of the day is the government’s monthly employment report, and as expected, the data was dismal. Nonfarm payrolls for December declined by 524,000, and the November figure was revised downward to a 584,000 decline, capping the worse year of job losses since 1945. If we look at the last three months of the year, the economy lost 1.5 million jobs. The only sectors that saw job increases were health care and the government, but if state local governments continue to struggle with declining tax bases and higher borrowing costs, government jobs should suffer as well (unless President Obama institutes a large-scale government hiring program). The unemployment rate jumped to 7.2%, and the U-6 unemployment rate, which includes discouraged workers, marginally attached workers, and people working part-time for economic reasons, rose to 13.5%. The Bureau of Labor Statistics (BLS), who is responsible for all of this data, sometimes refers to the U-6 figure as the “real” unemployment rate.
The average workweek declined by .2 hours to 33.3 hours, which is the largest monthly drop since 1982. People working less typically means that they are making less, and when you combine that with fact that consumer savings rates are increasing, it doesn’t bode well for consumer spending, and for that matter, GDP.
Jason Haley
Fixed Income Strategist
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