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Tying Friday’s Jobs Report To Rising Mortgage Rates
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Conforming and FHA mortgage rates in San Francisco Bay Area 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.
The January 2010 Jobs Report May Lead Mortgage Rates And Home Prices Higher
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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, Palo Alto 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.
The Bad Jobs Report Wasn’t All Bad — Mortgage Rates Fell
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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 Mountain View , the news was just fine.
The soft employment data led mortgage rates lower, making homes in North Palo Alto, 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.