Pre-Easter Weekend Comments

Today's Payrolls number for the month of March came in at 120K, far less than the market was expecting. The response of those futures markets which were still open for trading was swift and immediate - Emini S&P 500 futures dropped sharply while the US long bond staged a nearly two point rally.

So much for notions that the economy is performing well enough that the QE3 option is off the table.

The markets will not interpret this abysmal number as the start of a new and lower trend in employment but it will serve to squelch some of the uncalled for and certainly undeserved euphoria about the state of the US economic recovery that we have been treated to of late by the spinmeisters and various talking heads.

Some might try talking up the insignificant drop in the unemployment rate to 8.2% but that is another cute statistical gimmick brought about by the fact that the participation rate fell once again. Fewer people in the overall work force tends to push the unemployment number down masking the true condition of the chronically out of work who have simply given up looking for work.

Some are going to wait for the next month's numbers to see if this one was a one-off but for the time being, it should at least serve to stop the mouths of those pooh-poohing the notion that another round of QE is not going to be considered at some point. The economy may be plodding along but it is certainly not setting any records as far as increasing growth goes.

One other thing to consider here - not only will job growth need to do better than 250,000 month to get people excited, it also has to be growing fast enough to provide jobs for new additions to the work force - namely college grads and high school seniors who will be graduating within the next two months. Exactly where are they supposed to find work? It is one thing to have an economy growing at a rate fast enough to bring back into it those who have been unemployed and looking for work for more months than they can remember - but what about these new graduates also?

In the meantime I thought I would post a couple of charts detailing the Custodial Accounts for Foreign Central BAnks at the US FEderal Reserve.

Take a look at these and you can get a bit of an idea about foreign central bank appetite for US government and government agency debt.

I am quite curious as to whether or not these Treasury holdings have reached a plateau. They have remained under the $2.75 Trillion level for some time now. Have we reached a point where they are saying "NO MAS!" ?

If so, then will the Fed step up its purchases of US TReasuries to make up for the fall off in demand? All very good questions that we need to monitor as they will serve to show us whether or not our foreign "bankers" are willing to finance further our profligage ways.

Happy Easter to all my Christian readers and a Blessed Passover to my Jewish ones.