Forget What You Know About The Payroll Count
Matthew Graham • May 8, 2026
Everyone's been talking about the ongoing change in the significance of the payroll number in the jobs report. OK, not everyone, but economists and bond traders for sure. The issue is the rapid shift in the size of the labor force as well as recent volatility in the multiple jobholder category, among other things. Specifically, the labor force has been shrinking since November and was already growing at a slower rate before then. That means it takes a lower NFP number to keep unemployment flat. More importantly, it means that NFP is no longer the be all, end all economic indicator. For decades, NFP has been the go-to number in the jobs report while the unemployment rate was an afterthought. Now, it's the complete opposite. That's why NFP can come in at 115k vs 62k today while unemployment is 4.3 vs 4.3 and bonds are just a hair stronger (never would have happened before these structural changes began).
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Bonds are starting the day moderately weaker. The reasons are straightforward. Chief among them, Trump rejected Iran's counterproposal to end the war, calling it "totally unacceptable." In response, Iran's foreign minister said it will never bow to foreign pressure. Adding fuel to the fire, Netanyahu said the war was not over and there was "more work to be done." When trading began late Sunday night, oil prices were roughly 5bps higher and 10yr yields rose 4bps to roughly 4.40%. Despite those losses, trading levels for both oil prices and bond yields remain lower than they were before last week's big rally on Wednesday morning.
Bonds are starting the day moderately weaker. The reasons are straightforward. Chief among them, Trump rejected Iran's counterproposal to end the war, calling it "totally unacceptable." In response, Iran's foreign minister said it will never bow to foreign pressure. Adding fuel to the fire, Netanyahu said the war was not over and there was "more work to be done." When trading began late Sunday night, oil prices were roughly 5bps higher and 10yr yields rose 4bps to roughly 4.40%. Despite those losses, trading levels for both oil prices and bond yields remain lower than they were before last week's big rally on Wednesday morning.
Calm and Slightly Stronger, But Volatility Will be Back
Once or twice per week, the bond market manages to post a fairly calm trading day against the prevailing backdrop of generally higher volatility. Today was such a day. The most helpful catalyst was an absence of any major war-related headlines and associated oil price volatility. That said, it's a near certainty that war-related volatility will be back in the coming week.
Econ Data / Events
Average earnings mm (Apr)
0.2% vs 0.3% f'cast, 0.2% prev
Non Farm Payrolls (Apr)
115K vs 62K f'cast, 178K prev
Participation Rate (Apr)
61.8% vs -- f'cast, 61.9% prev
Unemployment rate mm (Apr)
4.3% vs 4.3% f'cast, 4.3% prev
Consumer Sentiment (May)
48.2 vs 49.5 f'cast, 49.8 prev
Sentiment: 1y Inflation (May)
4.5% vs -- f'cast, 4.7% prev
Sentiment: 5y Inflation (May)
3.4% vs -- f'cast, 3.5% prev
Market Movement Recap
08:32 AM No major reaction to jobs report. MBS up 2 ticks (.06) and 10yr down 1.5bps at 4.375
10:46 AM Slightly stronger but leveling off. MBS up 6 ticks (.19) and 10yr down 3.6bps at 4.356
02:13 PM MBS up 5 ticks (.16) and 10yr down 3.5bps at 4.356
It ended up being a decent round trip for rates this week. Monday kicked things off with a jump to the highest level in more than a month, and the third highest since August 2025. But that ended up being the only day where rates went higher. Wednesday brough the biggest chunk of the recovery with MND's daily rate index dropping 0.10%. Tuesday and Friday (today) each added a 0.02% drop, taking the index to 6.42% after ending last week at 6.44%. War-related headlines were less of a factor today and volatility was unsurprisingly lighter as a result. This is an adjustment for seasoned rate watchers who are used to monthly jobs report being a distinct source of volatility. It's especially notable that the job count came in significantly higher with no ill effect on bonds/rates. Over the past 6 months, markets have shifted their jobs report focus from the payroll count to the unemployment rate, reversing decades of precedent. Today's outcome is more logical in that context as the unemployment rate was right in line with expectations at 4.3%.
