The latest take on jobs and incomes
* Personal income dropped 0.1% from March, vs. expectations for a 0.3% gain. Personal spending rose 0.5%, above forecasts for a 0.4% rise. The savings rate, as measured by Uncle Sam, dropped to -1.3% from -0.7% a month earlier.
* The core inflation measure embedded in the income and spending report was tame -- it rose 0.1% on the month (forecasts called for a 0.2% rise). That brought the year-over-year core rate down to 2% from 2.1%. This is the lowest YOY rise since February 2006.
* But before you break out your bond market pom-poms, consider what the fresher data for May showed -- a 157,000 gain in non-farm payrolls (the Bloomberg forecast: +132,000) ... a 0.3% monthly rise in average hourly earnings ... and an uptick in the year-over-year rate of change in earnings, to 3.8% from 3.7% a month earlier. The unemployment remained at a relatively low 4.5%.
* Job creation was strong in the service industry (+176,000), led by gains in things like health care, education, and leisure. The manufacturing sector shed jobs yet again (-19,000), while construction employment was unchanged.
Net/Net, the report confirms other recent readings that show the economy picked up a bit more steam in May. Bonds are reacting by selling off 11/32. Ten-year yields have breached the 4.9% resistance I mentioned earlier, recently hovering around 4.92%. If we close here, it opens the door for a move to the old yield highs around 5.25%.