Sun State Savings

On the first Fri­day of each month, the Bureau of Labor Sta­tis­tics releases Non-Farm Pay­rolls data for the month prior. 

The data is more com­monly called “the jobs report” and it’s a major fac­tor in set­ting mort­gage rates for home­own­ers every­where. Espe­cially today, con­sid­er­ing the economy.

This is because, although it’s believed that the reces­sion of 2009 is over, there’s emerg­ing talk of new reces­sion starting.

Sup­port for the argu­ment is mixed:

1. Job growth has been slow, but planned lay­offs touch a 10-year low
2. Con­sumer con­fi­dence is down, but beat­ing expectations
3. Con­sumer spend­ing is weak, but not declin­ing

In other words, the econ­omy could go in either direc­tion in the lat­ter half of 2010 and the jobs mar­ket may be the key. More work­ing Amer­i­cans means more pay­checks earned, more taxes paid, and more money spent; plus, the con­fi­dence to pur­chase a “big ticket” items such as a home.

Jobs growth can pro­vide tremen­dous sup­port for hous­ing, too.

Today, though, jobs growth was “fair”. Accord­ing to the gov­ern­ment, 54,000 jobs were lost in August, but that reflects the depar­ture of 114,000 Cen­sus work­ers.  The pri­vate sec­tor (i.e. non-government jobs), by con­trast, added 67,000. 

In addi­tion, net new jobs was revised higher for June and July by a total of 123,000.  That’s a good-sized num­ber, too.

Right now, Wall Street is react­ing with enthu­si­asm, bid­ding up stocks at the expense of bonds — includ­ing mortgage-backed bonds.  This is caus­ing mort­gage rates to rise.  Rates should be higher by about 1/8 per­cent this morning.

Mort­gage rates have been falling since April but that momen­tum could reverse tomorrow.

The Bureau of Labor Sta­tis­tics releases the July jobs report at 8:30 A.M. ET Fri­day. With a stronger-than-expected read­ing, mort­gage rates should rise, harm­ing home afford­abil­ity. Jobs are a key­stone in eco­nomic growth and growth is tied to rates.

Ear­lier this year, job growth went pos­i­tive and reached as far north as 431,000 jobs cre­ated in May. That fig­ure slipped neg­a­tive last month, how­ever, as the tem­po­rary, decen­nial cen­sus work­ers left the workforce.

Jobs mat­ter to the U.S. econ­omy. Among other con­cerns, unem­ployed Amer­i­cans spend less on every­day goods and ser­vices, and are more likely to stop pay­ments on a mort­gage. These effects retard the econ­omy, spur fore­clo­sures, and harm home values.

The reverse is also true. More work­ers means more dis­pos­able dol­lars and, in the­ory, a stronger economy.

Ana­lysts expect that a net 65,000 jobs were lost in July. Wall Street — and Main Street — have a big inter­est in those results.

Poor jobs data would likely result in a stock mar­ket sell-off which would, in turn, boost the value of government-backed mort­gage bonds. This is because bonds tend to per­form well when the econ­omy is sag­ging and higher bond prices mean lower mort­gage rates.

Strong jobs data, how­ever, would likely push stock mar­kets up and bond mar­kets down. This would cause mort­gage rates to rise. The stronger the employ­ment fig­ures, the higher mort­gage rates should go.

So, if you’re happy with where mort­gage rates are today and you’re con­cerned about what the jobs report may do to them tomor­row, con­sider talk­ing to your loan offi­cer about lock­ing your rate as soon as possible.

Once the jobs report is released, it may be too late.