On the first Friday of every month, the U.S. government releases its Non-Farm Payrolls report.
More commonly called “the jobs report”, Non-Farm Payrolls is a major market mover. The number of working Americans is directly tied to the health of the economy which, in turn, drives the stock and bond markets.
In general, when jobs numbers improve, it’s good for stocks and bad for mortgage bonds. It follows, therefore, that conforming mortgage rates in California rise because rates always move opposite of mortgage bond prices.
Conversely, when jobs numbers worsen, it tends to be bad for stocks and good for mortgage bonds. Mortgage rates fall.
Today, markets are behaving a bit differently.
Despite 290,000 jobs created in April 2010 — nearly twice the expected amount — and a 40 percent upward revision of March’s numbers, mortgage rates are essentially unchanged.
In a normal environment, rates would be higher. Today is not normal.
Today is a departure because, for all of the jobs report’s import to Wall Street, it’s less important to markets than what’s happening in Greece right now.
Greece is struggling to meet its debt obligations and its citizens are rioting.
Until a debt solution for Greece is made that sticks, unrest in the region will drive safe haven buying both domestically and abroad. U.S. mortgage bonds will gain on that movement because mortgage bonds are “safe”, and mortgage rates will fall.
Indeed, this is exactly what’s been happening since the start of April. Mortgage markets have been rallying for 5 weeks.
So, today’s jobs news is terrific for the economy and mortgage rates should be rising because of it. But, they’re not. Consider taking advantage — lock in a rate.
Conforming and FHA mortgage rates in California have improved over the last 10 days, but that could all change this Friday with the release of February’s Non-Farm Payrolls report.
Non-Farm Payrolls is the official name of the government’s monthly jobs report and, given the fragile state of the U.S. economy, Wall Street will be watching it closely.
Mortgage rates could spike come Friday morning.
Jobs are an important part of the nation’s recovery. Among other concerns, unemployed Americans don’t spend as much money on goods and services, and are more likely to default on a mortgage. This retards economic growth and increases the potential for foreclosures.
When jobs numbers worsen, therefore, it follows that economic projections worsen, too.
Poor employment figures draw money away from the stock markets and into less-risky bond markets, including mortgage-backed bonds. Mortgage rates improve as a result. Conversely, when jobs numbers improve, stock markets gain and bond markets worsen.
Analysts expect that a net 30,000 jobs were lost in February.
The Bureau of Labor Statistics press release hits at 8:30 A.M. ET, roughly an hour before Friday’s mortgage pricing will be available to consumers. If you’re worried about rates rising on the heels of a strong jobs report, therefore, be sure to get your rate lock in today instead. Once Friday gets here, it may be too late.
On the first Friday of every month, the U.S. government releases its Non-Farm Payrolls data from the month prior. The data is more commonly known as “the jobs report” and it swings a big stick on Wall Street.
Especially now — many analysts believe job growth is tightly linked to the future of the U.S. economy.
Therefore, when January’s jobs report hits the wires at 8:45 AM ET tomorrow, San Jose home buyers would do well to pay attention. A net job reading that is much higher (or lower) than Wall Street’s expectations can make a serious change in home affordability.
Wall Street expects that the economy added 13,000 jobs last month. It would mark the second time in 3 months that the jobs report showed a net monthly gain.
In November 2008, the economy added 4,000.
Jobs matter to the economy for a lot of reasons, but one of the biggest is that when Americans are working, Americans are buying and consumer spending accounts for 70 percent of the economy.
Job growth spurs the economy and draws money to the stock market. Unfortunately for rate shoppers, that kind of stock market growth happens at the expense of the bond market which is where mortgage rates are made.
Good jobs data usually means higher mortgage rates.
Also, job growth can lead to higher home prices. This is because working homeowners are less likely to default on a mortgage versus non-working homeowners. In this way, job growth helps hold foreclosures to a minimum which, in turn, suppresses the housing supply.
Less supply means higher prices for home buyers.
Mortgage rates are idling this morning in advance of tomorrow’s data. If you’re shopping for a mortgage rate, the prudent play may be to lock your rate before the jobs data is released. A jobs figure that’s higher than the 13,000 expected could cause rate to rise sharply.
Despite the headlines, it’s important to remember that December’s jobs report wasn’t all bad news.
Sure, the economy shed 85,000 jobs last month and the Unemployment Rate failed to dip below 10%, but for home buyers and rate shoppers in Los Gatos , the news was just fine.
The soft employment data led mortgage rates lower, making homes in Willow Glen, for example, more affordable for buyers.
There is two sides to every economic coin.
Since early-2008, the U.S workforce has been closely tied to home financing. As the economy slowed and jobs were lost, Wall Streeters pulled money from the risky stock markets and moved it to of the relative safety of bond markets, instead.
Safe haven buying led mortgage bond prices higher which, in turn, caused rates to fall. Mortgage rates fell to 6 all-time lows in 2009. In a related statistic, 4.2 million jobs were lost last year.
And this is why Friday’s non-farm payrolls report was so good for buyers.
See, in November, the economy added new jobs for the first time since 2007, housing looked strong, consumer confidence was growing. The safe haven buying reversed and mortgage rates took off. Analysts believed the nation’s economic turnaround was complete.
But now, after December’s jobs report returned to the red, Wall Street is forced to rethink its position. Safe haven buying is back and mortgage rates are lower because of it.
Over the next few months, expect a lot of this back-and-forth action in rates. In general, positive news for the economy will be met with higher mortgage rates and negative economic news will be met with lower mortgage rates. There will be exceptions, but the general rule should hold.
