FHA Loan Austin Information

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 residents of Texas and 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. 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.

As much as we’d all like this Jobs Report to be a good one for the sake of the economy, I have some serious doubts.

The market wants to see private sector job creations of north of 100K, to feel that the recovery has traction. But the persistently high unemployment claims numbers and legislative uncertainty has provided stiff headwinds. Stock traders and investors will be paying very close attention to tomorrow’s numbers and investors will waste no time in pulling the trigger to sell Stocks and preserve their gains if tomorrow’s jobs number is soft.  As we know, cash from Stock sales often find its way to the Bond market, which would help Bond prices and possibly improve mortgage rates.

Bottom line, I don’t feel the Jobs Report is going to be good enough for Stocks to like it – no matter how the government and media might spin it – and that should push Bond prices to the upside so I would recommend floating into the report.