Mortgage rates could move higher beginning tomorrow morning. The Bureau of Labor Statistics releases its February jobs report at 8:30 AM ET.
Home buyers and rate shoppers would be wise to take note. The jobs report is almost always a market-mover.
Consider last month.
Although net job creation fell well-short of expectations in January — just 36,000 jobs were added — the national Unemployment Rate dropped to 9.0%, its lowest level in 2 years. The marked improvement surprised economists and sparked inflationary concerns within the investor community.
This, in turn, caused mortgage rates to rise.
In the days immediately following the jobs report’s release, conforming rates jumped 0.375 percent. That’s equivalent to a mortgage payment increase of $22 per month per $100,000 borrowed.
A similar spike could occur tomorrow.
Wall Street scrutinizes job growth because with more working Americans, there’s more consumer spending, and consumer spending accounts for 70% of the U.S. economy. A blow-out number tomorrow would change expectations for the future, and lead rates higher again.
The economy shed 7 million jobs between 2008 and 2009 and has barely made 1 million of them back. Tomorrow, analysts expect to see 183,000 jobs created. If the actual reading is lower-than-expected, mortgage rates should fall and home affordability will improve.
Anything else and mortgage rates should rise. Likely by a lot.
Therefore, if you’re shopping for a mortgage right now, consider your risk tolerance. Once markets open tomorrow, you can’t get today’s rates.
Americans are getting back to work. Sort of.
This morning, at 8:30 AM ET, the Bureau of Labor Statistics released its Non-Farm Payrolls report for January 2011. More commonly called “the jobs report”, the government’s data showed a large decrease in the number of working Americans as compared to December, but a sizable drop in the Unemployment Rate.
The job growth figures were much lower than consensus estimates:
- Expected job growth in January : +148,000 jobs
- Actual job growth in January : +36,000 jobs
January’s Unemployment Rate surprised analysts, too, but not in a bad way, falling from 9.4 percent in December to 9.0 percent last month. This is the nation’s lowest Unemployment Rate in nearly 2 years.
Today’s jobs report is rough news for home buyers and rate shoppers. Shortly after the report’s release, Wall Street is attributing the low jobs number to “bad weather” and is choosing to focus on the strong Unemployment Rate instead.
U.S. stock futures are now rising ahead of open, an increase that will come at the expense of the bond markets. Indeed, mortgage-backed bonds are losing this morning already.
Conforming mortgage rates are expected to start the day at least +0.125% from Thursday’s close and, if momentum continues, could tack on an additional +0.125% before today’s closing bell.
The government’s report is an excellent example of how important jobs data can be to home affordability — especially in a recovering economy.
The economy shed 7 million jobs between 2008 and 2009 and fewer than 1 million of those were recovered in 2010. It’s a data point Wall Street watches closely because more working Americans means more consumer spending, and more consumer spending means more economic growth. Consumers account for 70% of the U.S. economy, after all.
More workers also means more taxes paid to federal, state and local government, and, in theory, fewer loan charge-offs from banks. These, too, keep the economic engine moving forward, spurring more spending and job growth.
If you have not yet locked a mortgage rate, consider locking one today. On the heels of today’s jobs data, 30-year fixed rates will scratch at their highest levels of the year.