Mortgage rates improved this past week as weaker than expected economic data had markets speculating that the Fed will not raise rates at the September meeting, but a mixed Jobs report on Friday has some thinking that a September increase is still very much on the table.
The big news was a weaker than expected Non-Farm Payrolls report, coming in at 173,000 jobs versus a 217,000 estimate. However, there were some definite positives in the report with a 2 month net revision of +44,000 jobs, and the unemployment rate dropping more than expected to 5.1% from 5.3% the month prior. Another big positive in the report was Average Hourly Earnings, a number the Fed watches closely, coming in at +0.3% versus a +0.2% estimate month over month. The Fed has been concerned about stagnant wage growth in the recovery, and have been watching for improved earnings as one of many conditions that need to be met before raising rates. The statement from the last FOMC meeting stated that the Fed needed to see “some further improvement” in labor markets to justify a rate hike, and while the job gains were lighter than expected, this report still suggest that standard being met. The only thing that seems to be tying the Fed’s hands is the overseas weakness, mostly coming from China as this is spilling over into both Asian, European, and US equity markets. Meanwhile, average mortgage rates have benefited from the worldwide equity sell off and have remained below 4%, which still provides strong support to housing.
Economic indicators that met or beat expectations this week included Construction Spending at +0.7% versus a +0.6% estimate, and ISM Non-Manufacturing at 59 versus a 58.2 estimate. Indicators that missed estimates included Chicago PMI at 54.4 versus a 54.5 estimate, ISM Manufacturing at 51.1 versus a 52.5 estimate, ADP employment at 190k versus a 200k estimate, Factory Orders at +0.4% versus a +0.9% estimate, and weekly Jobless Claims at 282k versus a 275k estimate.
By: Michael Borodinsky
Vice President/Regional Builder Branch Manager | Caliber Home Loans
Call Michael: 732-382-2654
Email Michael: Michael.Borodinsky@caliberhomeloans.com
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