Mortgage Rates Get the “Jobs” Treatment, July 2, 2010

Mortgage Rate Trend Direction:      Up

Economic Reports/Rate Impact:     Non-Farm Payroll Report, 8:30 AM ET, High Rate Impact

                                                                Unemployment Rate, 8:30 AM ET, Moderate Rate Impact

                                                                Factory Orders, 10:00 AM ET, Moderate Rate Impact

Key News:                                            European Debt

 

Summary

 

A choppy week with a string of weak economic news across the board has had little net affect on mortgage rates. Today the key economic report that analysts look to for evidence of economic strength or weakness is released. The Non-Farm Payroll report for June was expected to be the key director of mortgage rates today. However, as discussed below, the report was somewhat mixed in its signals.  Consequently, a tendency of stock markets to rise on the day before a holiday weekend may have more of an impact.

 

Markets in Asia and Europe were modestly higher as traders there awaited the jobs data from the US.

 

Mortgage rates are likely to rise this morning when lenders release their initial pricing.

 

Impact of economic reports

 

The Non-Farm Payroll Report was released at 8:30 AM ET and was initially interpreted as showing improvement since the Unemployment Rate declined. However, as the report was more closely examined it became clear that the employment situation in the US is not getting appreciably better. Overall jobs were down in the report and private sector jobs (non-government) grew, but not to the degree anticipated. Additionally, an indicator of where the employment situation may be heading, hours worked by employees, declined. Typically when employment is increasing the “hours worked” figure also increases. Analysts view the report as negative, but not to the degree feared.

 

Impact of international or political events

 

Little news of significance out of Europe or Asia seems poised to affect US markets or mortgage rates today. Comments from European Union (EU) Monetary Affairs Commissioner, Olli Rehn indicated that plans may be considered to permit “orderly insolvency” of member nations. This news had little immediate effect on markets, as it would first require a change in the treaty that created the EU.

 

Has a “functional bottom” in mortgage rates been reached?

 

In my Weekly Mortgage Rate Summary that will be posted this afternoon, I will further explore the reasons why mortgage rates have not fallen to the point that would be expected given recent market performance. Analysts are providing many theories—what’s the truth?