Jobs Growth Spurs Economy and raises Mortgage Rates

Jobs Growth Spurs Economy and raises Mortgage Rates

Employers are back to adding jobs. If you’re planning to buy a home or refinance one, look out. More jobs might mean higher mortgage rates in 2011 putting home buyers against the eight ball.

Jobs Growth Spurs Economy, Sinks Mortgages

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report.

More commonly called “the jobs report”, Non-Farm Payrolls data include raw employment figures from around the county, and the Unemployment Rate. It’s one of just a few data points around which markets routinely pivot.

Jobs data is important to markets because of how job creation influences the economy:

1. More jobs leads to more income and more consumer spending

2. More consumer spending leads to more business growth

3. More business growth leads to more job creation

It’s a self-reinforcing cycle and, as business grows, the economy expands, pushing stock markets higher. Consider that stocks have lost at the expense of bonds since 2007 — including mortgage bonds — we can expect stock market growth to correlate with bond market loss.

This results in higher mortgage rates for conventional and FHA mortgages.

With Revisions, December Is Inline With Expectations

December’s Non-Farm Payrolls hit this morning.  It’s both inline with expectations, and a disappointment.

According to the government, 103,000 jobs were created in December. In addition, October’s and November’s figures were revised higher fifty thousand, raising the monthly total to +153,000 new jobs.

Economists had officially expected 135,000 new jobs in December, but “whisper numbers” ranged the number as high as 250,000. It’s why mortgage markets are improving today. Traders are dumping their overly-aggressive portfolios and moving back into bonds.

The Unemployment Rate dropped to 9.4%, its lowest level since July 2009.

Timeless Advice : Lock On The Dips

Jobs growth will figure big in mortgage markets this year as we return to historical norms. Wall Street made a bad guess this month and that makes for a great mortgage rate-locking opportunity.

Mortgage rates are falling today but not by much. Use the dip to your advantage.

Call your loan officer and lock your rate. Or, if you don’t have a loan officer, click here to send me an email. Include some basic details about your mortgage and I’ll reply back with ballpark rates for you. If the math works, we’ll lock your rate together before rates go back up.

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