Economists Off The Mark A Little With Jobs Forecast

I fully thought that we would see a weak payroll report today, at least weaker than the 100k jobs forecast. But I didn't think we would actually see job losses.

But that is what happened. The economy lost -4000 jobs last month, with notable weakness in the housing and construction industry. This marked the first negative reading in 4 years, since August 2003.

That caused some weakness at the open of our markets, but the silver lining is that it takes much of the doubt away about whether or not the Fed will cut rates. They will cut rates. The debate now is if they will cut 25 bps or 50 bps. Goldman Sachs (GS) was out this morning saying that they think the Fed will cut 50 bps.

While everyone will be solely focused on the jobs report today, don't overlook the added pressure of the rising Yen. We have talked a lot here about the concerns regarding the Yen carry-trade. Well, this morning, the Yen is gapping higher again and this is likely exerting just as much pressure on the financial markets.

All of the above is causing bond yields to fall further. The 10-year yield is now down to 4.39%, and from both a fundamental and technical standpoint, looks to be going lower still.

I wonder where all of those bears are now that were saying there was no way the Fed would cut rates? Of course, they will simply change their tune and say, "Ok, the Fed may cut. But will it matter?" The answer is-- yes.