It's All About Jobs!

It is the first Friday of the month and that brings us the official government report on jobs, aka the Employment Situation Report. This is arguable considered the single most important data print we receive on a monthly basis.

The Bureau of Labor Statistics have released the findings of the July Household Survey & the Non-Farm Payrolls Survey. Together these two surveys make up the Employment Situation Report, the most highly anticipated dataset available to the market. This release provides four headline measures on the health of the jobs sector.

1. Nonfarm Payrolls: totals the number of jobs that were added to or cut from employer payrolls in the prior month. Consensus Forecast: -100,000 vs. -131,000 in July (Private payrolls increased 71,000 in July and +41,000 expected today)
2. Unemployment Rate: the percentage of working-age, mentally able-Americans who are jobless. Consensus Forecast: 9.6% of the labor force vs. 9.5% last month
3. Average Hourly Earnings: the average amount of earnings per hour of labor performed. Consensus Forecast: +0.1% vs. +0.2% last month.
4. Average Work Week: average amount of hours worked by an employee per week. Consensus Forecast: 34.2 hours vs. 34.2 last month.

Here are the results:

1. Nonfarm Payrolls: -54,000 in August with the private sector adding +67,000 jobs. The headline number is negative due to temporary government census takers losing their jobs. July’s private payrolls was revised better to show +107,000 jobs! Revisions to June and July showed 123,000 fewer job losses. BETTER THAN EXPECTED
2. Unemployment Rate: rose to 9.6% AS EXPECTED
3. Average Hourly Earnings: +0.3% Since workers are making more money per hour, that will equate to a larger paycheck which can lead to more consumer spending. BETTER THAN EXPECTED
4. Average Work Week: 34.2 AS EXPECTED

Following the release, stock market futures moved considerably higher indicating a positive day for stocks while the fixed income sector is under pressure.

Lender rate sheets have worsened further this morning. The par 30 year conventional rate mortgage has risen to the 4.25% to 4.50% range for well qualified consumers. If you are seeking out a 15 year term, you should expect a rate in the 3.75% to 4.00% range. To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you plan on keeping your current home for less than three years, you should consider a no cost or low cost loan where the rate will be higher but you will pay little or no closing costs. Keep in mind, getting a mortgage rate is like buying anything else. You can pay more in costs and get a lower interest rate or less in costs and accept a higher interest rate.

Hopefully you already locked your interest rate. If you didn’t, well you will have to pay more for the rate that you were quoted or you will have to take a higher interest rate if you lock today. Even though the Employment Report was better than expected, it was still bad. The private sector jobs created are not enough to even keep up with population growth. If you have not locked, I feel floating over the weekend is justified. Historically, lenders are quite conservative on their pricing when facing a holiday weekend.

In celebration of Labor Day, all U.S. markets will be closed on Monday. I will get back to you on Tuesday with a look at what might impact mortgage rates next week.