BY DAN GREEN
September Non-Farm Payrolls will affect mortgage rates through November, FOMC meeting
MORTGAGE RATES AND THE JOBS REPORT
On the first Friday of each month, the Bureau of Labor Statistics publishes its Non-Farm Payrolls report.
Commonly called “the jobs report”, Non-Farm Payrolls highlights employment changes across 10 private labor market sectors including insurance and finance.
Wall Street watches Non-Farm Payrolls closely.
Not only because jobs are linked to the future of the economy, but because jobs are also linked to Federal Reserve policy.
The Federal Reserve is the nation’s central banker.
Meanwhile, the jobs report matters to “Main Street”, too. This is because the monthly jobs report directly affects current mortgage rates and is the among the main reasons why Fridays are the second-most volatile day in the mortgage markets.
The next report gets released Friday, at 8:30 AM ET. With a better-than-expected read, mortgage rates and APRs are expected to climb.
Click to see today’s rates (Nov 10th, 2015)
12.1 MILLION JOBS ADDED SINCE 2010, 175K PER MONTH
The Non-Farms Payrolls report is a broad look at the U.S. labor market.
By industry, it shows which economic areas are expanding, and which areas are contracting. It also reports the U.S. unemployment rate.
Non-Farm Payrolls is a monthly Wall Street highlight. Job growth is paramount to economic growth, and economic growth drives investment strategy.
Recently, the jobs report’s importance has been magnified.
This is because the Federal Reserve is actively stimulating the economy with its zero-interest rate policy (ZIRP), and because the central banker’s programs will continue so long as economic development demands it.
It’s believed that a strong jobs report will push the Fed to “liftoff”.
When the Fed raises the Fed Funds Rate, it’s expected that equities markets will gain and bonds markets will lose. This would affect mortgage rates negatively, raising them from their current levels.
Last week, Freddie Mac reported the average 30-year fixed rate conventional mortgage rate at 3.76% nationwide.
VA mortgage rates and FHA rates are even lower.
Today’s low rates have also helped refinancing households save hundreds of dollars each month via rate-and-term refinances, cash-out refis, and the various streamlined refinance loans available to today’s borrowers.
Many mortgage borrowers are saving 30% monthly and more.
Use the home mortgage calculator to see how much money you can save.
HOW JOBS AFFECT HOUSING, MORTGAGE RATES
The U.S. labor market is tightly tied to housing. Jobs provide households with income, confidence and capital; and, confident persons are more likely to buy a home or relocate.
Meanwhile, as the number of buyers in a market grows, the supply-and-demand curve shifts, which results in higher prices for sellers and the creation of real wealth. This, too, can boost confidence.
Furthermore, employed persons are also more likely to be mortgage-approved. Even before your first day of work, you can get a loan via the offer letter mortgage.
It’s no coincidence that the labor market’s recent rebound has coincided with a rise in U.S. home values.
Nationally, home values have recovered all of last decade’s losses and some markets — including Phoenix, San Francisco and Los Angeles — are making remarkable gains.
Rising home prices would typically be bad for a buyer’s purchasing power, but with 30-year mortgage rates still beneath four percent, home affordability remains near its highest point in history.
Homes are selling quickly.
Recent data from the National Association of REALTORS®, for example, shows a large percentage of all homes selling in 30 days or fewer; and, a shrinking supply of homes nationwide.
The U.S. home supply is now less than 5 months, which means that, at the current pace of sales, every home for sale would get sold by March.
At some point, mortgage rates will rise and, when they do, home affordability will take a hit. With the jobs report looming, rates could rise as soon as Friday morning.
Click to see today’s rates (Nov 10th, 2015)
LINKING JOB GROWTH TO FUTURE FED POLICY
Between 2008-2009, the U.S. economy fell into recession, catalyzed by the failure of Lehman Brothers; the near-collapse of mortgage lending; and the movement of Fannie Mae and Freddie Mac into conservatorship by the Federal Home Finance Agency (FHFA).
7.4 million jobs were eliminated.
Since that period, though, hiring has resumed. 12.1 million jobs have been added back to the U.S. economy — a 164-percent recovery in terms of “employed persons”.
Today’s jobs may not be of equal pay or stature, but an increase in the number of employed persons is a net-positive for the economy.
Furthermore, unemployment rates have dropped nationwide, down more than four percentage points from the peak.
Should the October job data read stronger-than-expected, then, the Fed may raise the Fed Funds Rate at its next meeting, scheduled for mid-December.
Analyst calls are for 190,000 net new jobs created last month, with estimates ranging from one hundred fifty thousand to two hundred forty thousand.
Consider locking your mortgage rate before the Friday morning release is made. Once the jobs report hits, it may be too late to get locked.
WHAT ARE TODAY’S MORTGAGE RATES?
The July jobs report releases Friday at 8:30 AM ET. Today’s ultra-low rates could be at-risk – they’re already moving higher, after all.
Take a look at today’s real mortgage rates now. Your social security number is not required to get started, and all quotes come with instant access to your live credit scores.
Show Me Today’s Rates (Nov 10th, 2015)
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