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By G. Steven Bray
Bond markets are still searching for something to motivate a move towards higher or lower rates. We had a contender last week with very weak wage growth and economic turmoil overseas. But this was really just more of the same, and with the jobs report due this week, markets hit the pause button again.
Look for two things from the jobs report on Fri. First, analysts predict the economy gained a bit more than 200k jobs last month. If the reality was very different from that, rates are likely to move. I think fewer jobs created is the more potent miss because it will reinforce a budding narrative that the economy is softening.
Maybe the more important aspect of the report will be reported wage growth. Earlier this year, it appeared that wages, which have been stagnant during this recovery, finally might be rising. But recent economic reports have turned any hope to despair. Friday’s report could revive that hope if it shows significant wage growth, and that could prod rates higher.
The wildcard out there right now is China. The Chinese economy is slowing. The question is how much that will affect the US economy. It’s too soon to tell, but the uncertainty will keep some downward pressure on rates.
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