The September jobs report came out on Friday.
Nonfarm payrolls grew by just 51,000 in September, according to the Bureau of Labor Statistics. The forecast had been for a net increase of about 120,000 jobs, nationally.
Holden Lewis discusses it:
Conventional wisdom says the weak employment report is good news for people who are shopping for mortgages.
“Today’s employment report is unfortunate news for the economy overall, but it signals a real opportunity for homeowners with adjustable rate mortgages that are poised to reset,” says Bob Walters, chief economist for Quicken Loans.
However, rates did NOT go down, after the report was released, for this reason:
The basic payroll number was sensible, a weak September gain of only 51,000 jobs, offset somewhat by an equivalent upward revision of August [revised from 128,0000 to 188,000]. Chaos followed immediately: [The BLS] announced a “benchmark revision” in its payroll accounting during the March ’05 to March ’06 interval.
It missed counting 810,000 jobs created between March, 2005 and March, 2006.
So, the unemployment rate dropped, from 4.7% to 4.6%, nationwide.
And, the bond market went crazy, because it meant our economy had been stronger than we all thought, for the past year, plus they were furious that the government had screwed up so badly.
Knowing that the economy had added 810,000 more jobs than we expected puts additional pressure on the Federal Reserve to raise interest rates, yet again. Inflation is running about 4%, annually. With more people gainfully employed, and less unemployed, companies will be forced to increase wages. This has an inflationary effect on the market.
The Fed may have no choice but to raise interest rates, leading to higher mortgage loan rates, down the line.
That’s not a good thing!!!
Source: Mortgage Matters – By Holden Lewis, Bankrate.com
Source: Labor report sends mortgage rates higher: Economic news wows bond market – By Lou Barnes, Inman News, by way of the Boston Globe