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June 05, 2009

"The Treasury Bond Market Is In Cardiac Arrest Today"

From the LAT, no less.

Interest rates soar on jobs data, putting housing at risk

The Treasury bond market is in cardiac arrest today over the May employment report: Yields are soaring, dealing another blow to investors who’ve been hiding out in government bonds -- and threatening another big jump in mortgage rates.

If rising home loan rates price more buyers out of the market, sellers will have to respond by cutting asking prices. Anyone have a better idea?

The 10-year T-note yield has surged to 3.84% from 3.71% on Thursday. The 2-year T-note has rocketed to 1.25% from 0.96%. Yields now are the highest since mid-November.


And that raises the question of how soon the Federal Reserve will be forced to begin pulling back from its unprecedented easy-money policy.

Now, I guess maybe I'm stupid, but I don't get this penultimate sentence:

The May employment data offer real hope for an economic rebound. But can we have a lasting recovery if the housing market isn’t part of it?

What? The numbers were horrific and even worse than the somewhat-less-horrific expectations. Where is the LAT finding a silver lining here?

Anywhere they can find it, or pretend to find it, as this must-read piece argues. Counterpunch is actually a lefty site. But even they notice.

Last week we got a whole series of bad reports on the state of the economy. New and existing home sales both remain near their lowest level for the downturn, as house prices continue to drop at the rate of 2.0 percent a month. New orders for capital goods, a key measure of investment demand, fell by 2.0 percent in April. Excluding the volatile transportation sector, new orders were still down by 1.5 percent.

On Friday, the Chicago Purchasing Managers Index fell by more than 5 percentage points from its April level, approaching its low for the downturn. The employment component of the index did hit a new low.

These reports might have led to gloomy news stories, but not in the U.S. media. The folks who could not see an $8 trillion housing bubble are still determined to find the silver lining in even the worst economic news.

For example, National Public Radio told listeners that the new home sales figure reported for April was up from the March level . While this was true, the April figure was only 1,000 higher than a March level that had just been revised down by 5,000. April new home sales were 4,000 below the sales level that had originally been reported for March. USA Today touted a “surge” in durable goods orders, which was also based on a sharp downward revision to the prior month’s data.

The media have obviously abandoned economic reporting and instead have adopted the role of cheerleader, touting whatever good news it can find and inventing good news when none can be found. This leaves the responsibility of reporting on the economy to others.

Any serious examination of the data shows that recovery is nowhere in sight. The basic story of the downturn is painfully simple. We have seen a collapse of a housing bubble which has devastated the construction sector and also caused consumption to plunge.


The plunge in house prices has send consumption plummeting. The problem is not consumer attitudes, as many commentators seem to believe. Rather, the reason that most homeowners aren’t buying a lot right now is the same reason that homeless people don’t buy a lot of things: they don’t have the money.


If there is evidence of a recovery in this story it is very hard to find. The more obvious story is one of a downward spiral as more layoffs and further cuts in hours continue to reduce workers’ purchasing power. Furthermore, the weakness in the labor market is putting downward pressure on wages, reducing workers’ purchasing power through a second channel.

The media understands, I think, that it has bet the ranch on Obama. Their fates are now intertwined. Obama is, far more than GM, too big to fail.

And they will continue with the bailouts and emergency political capital infusions for as long as their credit -- their credibility -- allows.

But that won't be for very long. They are burning through credibility at an alarming rate, and will themselves be bankrupt at about the same time the country is.

Thanks to Circa.

The "Real Hope:" Buzzion explains:

Its because the amount lost was less than what was lost in April or something. They're spinning things so much soon we'll be able to use the media for power generation.

Right. Like a wounded man who loses a pint of blood in a hour, then another pint, then another pint... and then only half a pint. Must be getting better, right?

Or: He's almost out of blood entirely and his heart is barely pumping it anymore.

More Explaining: Terry Notus writes:

There are two numbers: 1) Job losses 2) Unemployment

Unemployment came in worse than expected because more people are looking for work.Job losses, actually came in better than expected.

The difference is that more people are looking for work, which makes unemployment look worse, even when job losses are not as bad as they could be. Hence the confusion.

So previously they were "discouraged workers"? Why did the media not inform us that such "discouraged workers" existed anymore?

Ah, okay. As Geoff noted:

While I was waiting for May’s numbers to be released I did a quick Google News search on “unemployment.” Here is the first set of entries that popped up:
Pittsburgh unemployment rate falls to 6.9 percent -- Bizjournals.com - Unemployment in the Pittsburgh area inched down in April to 6.9 percent…

US Economy: Jobless Claims Fall, Productivity Rises
--- Bloomberg

US jobless claims fall again, productivity rises
-- Reuters

Jobless claims are down, but work remains scarce
-- AP

You get the feeling that there’s a little pre-spin effort afoot? I mean, why put up an article on April’s unemployment on the day that May’s numbers come out? And while jobless claims did fall, interpreting that information without the unemployment rate is very difficult.

I do see now where one could claim that the numbers are "encouraging"... but only if one focuses laser-like on one metric and ignores the other.

I would have thought it hard to spin a 9.4% unemployment rate. I was wrong.

"Jeneane Garofalo" Weighs In:

I simply think this is the economy and Wall Street hating on a black man as president.


Morpheus... explains more, and makes a good point.

I think they are looking at the nonfarm payrolls number from the establishment survey. That was down 345K, but expectations were for a loss of 520K. Also, net revisions to prior months was +82K. These figures were on balance a positive, given the dire economic scenario priced in by bond markets.

The unemployment rate came in at 9.4% versus 9.2% expected, hit by a double whammy of a 350K increase in the labor force and 437K loss in employment. The household survey is usually considered less reliable as a guide to the labor markets, though, as compared with the establishment survey.

The key is... the press tended to focus on whatever the worst number was out of the two surveys (establishment vs. household) until somewhere around January 2009. Now, not so much. What changed?

I suppose these numbers are "positive," but only when compared to expectations of an even worse bloodletting. I guess it is fair to look for a silver lining and say the "rate of losses is going down." Sort of.

Eh, I don't think it's a genuine bottoming. I guess time will tell.

And Morpheus is 100% right in pointing out that, under Bush, the media always focused on the downbeat indicators. Under Obama, it only focuses on the positive.

What accounts for that, I wonder.

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posted by Ace at 03:29 PM

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