Thanks for visiting The Mortgage Reports. To stay absolutely current on mortgage markets and important guideline changes, be sure to take my free daily email alerts.

On the first Friday of each month, the Bureau of Labor Statistics releases a series of reports detailing:

• Job creation by U.S. businesses
• Wage growth for U.S. workers
• Unemployment rates

These three reports provide key growth metrics for the U.S. because strength in jobs ultimately leads to an expanding economy.

The cycle starts when growing companies find employees, typically from the unemployment pool.  Then, as more companies hire and the supply of available workers falls, the relative demand for each unemployed worker increases.  This creates an upward pressure on salaries for all workers.

Now, when people earn more money, of course, they spend more money and, right now, Americans are spending more than they are saving.  This imbalance forces businesses to require even more workers and the cycle continues.

As the economy gains momentum, the threat of inflation increases.

Now, in addition to its heavy impact on businesses and consumers, the monthly jobs report also carries a big stick with the Federal Reserve.  If the Fed see runaway job growth and thinks that inflation is looming, it will raise the Fed Funds Rate to slow down the economy; when the FFR is higher, businesses pay more to borrow short-term money, and consumers do the same.

This is one reason why the Non-Farm Payrolls report is so closely watched -- every business and every consumer has a stake in the U.S. economy.  The NFP report is one of the best metrics of the economy's growth opportunities.

This is also why markets move so swiftly when the actual jobs data varies from the  expected jobs data.  Like everything else in investing, it all comes down to expectations.

In March, its expected that 198,000 jobs were created.

If the number is "hot", (i.e. greater than 198,000 jobs created), expect mortgage rates to move higher because that points to inflation and inflation erodes the value of mortgage bonds.

If the number surprises low (i.e. fewer than 198,000 jobs created), expect mortgage rates to drop as traders reposition their bets for a calmer economy (in which the FOMC may stop raising the Fed Funds Rate).

Of course, this is all speculation.  We never know exactly what will happen to the economy, despite what the jobs report predicts.  The world is in constant motion and anything can upset that balance.

At the exact moment of the NFP release, though, it's the best tool that the market's got.

Source
Americans Saving Less Than Nothing
Tom Abate
sfgate.com, January 8, 2006 13:19 EST

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/01/08/BUG7IGJHEK1.DTL

---

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.