Jobs report Good news comes to those who wait. That was certainly true last week, when the delayed Jobs Report for October came in better than expected. Read on for details. The Jobs Report for October revealed that employers added 204,000 new jobs, well above the 100,000 expected. In addition, the number of job creations for August and September was revised higher by 60,000. The Unemployment Rate ticked up to 7.3 percent from 7.2 percent and was in line with estimates. The Labor Force Participation Rate (LFPR), a measure of how many people are looking for work, fell to 62.8 from 63.2 and remains at 35-year lows. Its important to note that in a recovery, the LFPR should be moving higher, not lower. Overall this was a good report on the surface, but there are still hurdles to jump in the coming months. In other key news, the first of three readings on third quarter Gross Domestic Product (GDP) showed that the U.S. economy expanded by 2.8 percent, up from the second quarter reading of 2.5 percent and well above expectations. The rise was due in part to a buildup in inventories, a pickup in trade, and increased spending by state and local governments. However within the report, consumer spending--the main driver of the U.S. economy--fell to a paltry 1.5 percent, the slowest rate in three years. This is one reason the strong Jobs Report was significant: If consumers arent confident about their jobs or are out of work or underemployed, spending will continue to be soft. That would not a good sign for the U.S. economy going forward. What does this mean for home loan rates? The Feds current Quantitative Easing program continues to help keep home loan rates attractive. Remember that the Fed has been purchasing $85 billion in Bonds and Treasuries each month to stimulate the economy and housing market. The Fed has said that its decision regarding when to taper these purchases will be dependent on economic data. If economic data in the coming weeks is strong, like the Jobs Report was, the Fed could discuss tapering its purchases in its December meeting of the Federal Open Market Committee. This could have a big impact on home loan rates heading into 2014. The bottom line is that home loan rates remain attractive compared to historical levels and now remains a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients. Forecast for the Week The Bond markets are closed on Monday in observance of Veterans Day while Stocks will be open for a regular session. The rest of the week features just a few economic data points. • The light economic calendar this week doesnt kick off until Thursday with Weekly Initial Jobless Claims, which continue to hover near the 340,000 range. Third quarter Productivity will also be released on Thursday. • Ending the week, theres news from the manufacturing sector with the Empire State Index on Friday. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on. When you see these Bond prices moving higher, it means home loan rates are improving -- and when they are moving lower, home loan rates are getting worse. To go one step further -- a red candle means that MBS worsened during the day, while a green candle means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. As you can see in the chart below, Mortgage Bonds plunged Friday after the October Jobs Report came in better than expected. Economic data points in the coming weeks will be especially important to monitor, as they will influence the Feds decision regarding its Bond purchases--which could impact home loan rates heading into 2014. Ill be watching all the news closely for these details. Chart: Fannie Mae 4.0% Mortgage Bond (Friday Nov 08, 2013)
Posted on: Sat, 09 Nov 2013 00:05:40 +0000
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