Advise your Clients: Locking later today and ahead of Jobs ReportCurrent Price of FNMA 4.0% Bond: $100.09, +19bpMortgage Bonds are trading higher - but are well off the best levels of the session. Tomorrow is the big Jobs Report - read on, as we will take a look at what the markets are expecting and what the technical's look like headed into this important release.Ooh that smell. Can't you smell that smell?...Lynyrd Skynyrd. That is about the only way to describe this morning's Initial Jobless Claims as the Labor Department reported today a stinky 474,000 fresh new jobless claims in the latest week. This was well above the 400,000 that was expected, and the highest level in 9 months. In an effort to tone down the odor, a Labor Department official attributed the rise to temporary layoffs in the auto sector, a temporary benefits package in Oregon, and an anomoly in the state of New York, where workers in the educational field such as bus drivers are eligible for compensation during the week of spring break. New Yorkers are always being blamed for causing trouble...but as we said last week - the pain in the labor market doesn't appear to be "transitory."Jobs Report OutlookExpectations are for 185,000 jobs to be created in April, with 200,000 private sector creations offsetting government job losses. Based on the recent weak economic reports, including a worrisome rise in Initial Claims and softer than expected employment readings within the Institute of Supply Management, there is no reason to think the report will come in better than expectations.Hourly Earnings gains were flat at 0.0% in February and March, and this month economists are expecting it to rise by 0.2%. The lack of earnings growth is one reason why inflation has not ticked up...yet. If workers are not in a position to demand higher wages because of the weak labor market, then workers have less money to spend...in turn, and that hurts consumer spending and demand slows further. And again in turn, if consumer demand slows, businesses are not in a position to raise prices. This is a tough cycle.The Unemployment Rate has been sliding lower in recent months, but that is largely because the labor force shrunk by 750,000 over the past few months. Economists are looking for the unemployment rate to hold steady at 8.8%. We think it could tick up this time around.All this said, there is a dark cloud lurking within the Jobs Report and it may garner more attention as we look deeper into the health of the labor market.In the past we talked about the "participation rate" within the Jobs report which is a ratio of the labor force, which is those working or looking for work, and the rest of the of the US population. Unlike the Unemployment rate, which could be "prettied up" by removing "discouraged" people from the labor force - there is no hiding folks in the participation rate. And the current participation ratio is 64.2, which represents a nearly 30-year low and well beneath the 10 year average of 66+ last seen in August 2008. Going forward, this is a number that will come under more scrutiny to see if the unemployment rate is getting lower because people are finding jobs...or if they have just given up on searching.The big question of course - is how will the market react to the Report?The FNMA 4% Bond has gained almost 300bp in less than one month - mostly on the heels of weaker incoming economic reports and prospect of more so-so economic readings coming down the immediate pike. So the market is set up and prepared for a disappointing reading - meaning that it may take a report with "extra stink" on it for Bonds to push another level higher. With the bar being lowered headed into the release - if the report, or any of it's sub-components, meets or is surprisingly better than expectations, Bonds could quickly give up some of the recent gains.Look at the chart on the Bond page in a quarter view - after 13 consecutive green candles, which means that prices are closing higher from where they opened, and with the Bond very overbought and just beneath a strong ceiling of resistance at the 200-day Moving Average - it may be wise to lock and protect your clients from what could be another very volatile report and subsequent Bond market reaction.