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December's jobs report was released this morning. It showed 85,000 jobs lost last month and no change in the Unemployment Rate.

For stock markets and out-for-work Americans, the figures are disappointing.  Net job loss slows economic recovery and creates an uncertain business climate.

Domestic growth is tempered until the jobs market returns.

But December's weak jobs data isn't universally awful. With the bad there comes some good.  See, prior to the release this morning, the Non-Farm Payrolls numbers were steadily improving.

• 6 months ago, 463,000 jobs were lost
• 3 months ago, 219,000 jobs were lost
• Last month, 4,000 jobs were created

Furthermore, there's been signals from the market that the economy has turned the corner.  Retail Sales are up and consumer confidence is returning.  Heck, even the Federal Reserve gave an optimistic outlook for 2010.

These stories played a big part in pushing the Dow to its 2009 high-point in December.  They also explain why mortgage rates went to crap.  A soft economy kept mortgage rates low in 2009.  Therefore, it should only follow that a firming economy causes them to rise.

That's exactly what happened in December.

Mortgage pricing worsened by 300 basis points with the biggest market losses coming in the last 10 days.  It happened because Wall Street expected 2010 to come out of the gates at full speed towards full recovery. Investors made their bets accordingly. Many chased risk, few wanted bonds.

And then today happened. The December jobs report is anything but "full speed". It's more of a trot. The negative print is forcing Wall Street to adjust.

Rate shoppers and Cincinnati home buyers are ecstatic.

Conforming mortgage rates are already 1/8 better today. FHA mortgages are improved, too.

Now, as a layperson, it's tough for you to keep track of the (literally) hundreds of things that make mortgage rates move. You don't have the time and you don't pay for the tools.  But I do.  And I share what I know with my clients.

If you know you'll need a mortgage in February, March or April 2010, know that rates will be volatile while Wall Street comes to terms on the economy. When it comes time to lock a rate, you can be pretty sure you'll get better terms by working with me that if you're working with your current lender's 800-number Call Center or some generic "web company".

Believe it or not, those people don't pay for good data.  They just watch the tickers on TV. And they rarely advise.

To get a better rate on your mortgage, call or to introduce yourself. I answer all of my own emails and like working with my readers.  Plus, I'm licensed in most states.

December's jobs report shows that the economy isn't 100% recovered yet. Until it is, mortgage rates will be bumpy. Knowing the precise moment to lock would save you interest rate and money.

Before this morning's jobs report, mortgage rates were up 0.375 percent on the week. Post-release, the figure has doubled.

According to the government, the U.S. economy shed just 11,000 jobs in November, a 100,000 job improvement from October and the lowest tally since June 2007. Furthermore, the national Unemployment Rate dropped to 10.0 percent.

The data is building economic optimism on Wall Street, forcing a retracement of the flight-to-quality bets made since October. These safe-haven bond buys dropped rates to their lowest levels of all-time last week. This week, not so much.

There's a massive MBS sell-off in process. Rates unwound 3 weeks of improvement in the first 3 minutes of trading.

Now, if it seems strange to be talking economic recovery while Americans are still -- let's face it -- losing jobs, remember that economic data always needs context and the context here is that Non-Farm Payrolls is a lagging indicator.  This means it's more of a commentary on past economic events than a prediction of future ones.

The jobs report rarely reflects the economy "right now" as illustrated above.

During the Recession of 2001, job loss peaked in October of that year -- 1 month before the recession ended.  Beginning in February, then, even as the economy expanded, job loss continued. It wasn't until October 2002 that job gains went net positive.

The same pattern emerged earlier this year.

• Job loss peaked in January 2009
• The recession ended in February 2009
• Job losses are continuing even as the economy is growing

And this is why today's job report, although negative, is still positive.  The numbers were much better-than-expected, further proof that the U.S. economy is in recovery.

Unfortunately for rate shoppers, though, mortgage markets are getting slammed. Already today, rates are up 0.375 percent.

If you're under contract for a home or otherwise in need of a mortgage, talk to your loan officer about rates as soon as possible. One of the dangerous patterns of which to be concerned is that rates tend to fall slowly and rise quickly.

We had several weeks of rates going lower; it could all unwind in just a day.

For questions about mortgage rates or for what rate you'd qualify, with some notes on your situation. The more you tell me, the faster I can respond with a rate, and my rates are pretty good.

The August jobs report was released this morning.

Unemployment rose to 9.7 percent nationwide as employers shed another 216,000 jobs.  The news may not be as bad as it first seems.

Despite ongoing job losses and a rising Unemployment Rate, the jobs report reinforces the notion that the recession may be ending soon, if it hasn't already.

This is because Wall Street tends to treat employment data as a lagging economic indicator.

1. Businesses are slow to hire new workers when the economy is improving
2. Businesses are slow to fire existing workers when the economy is worsening

Because of this pattern, the monthly jobs report rarely reflects the "right now" of the U.S. economy and Wall Street knows it.  More often, the report reflects the economy as it existed several months ago and, based on data, the economy appears to have broken out of its funk in April or May.

Consider these 2 examples of employment as a lagging indicator:

1. Job losses peaked in January 2009 -- 4 months after the September 2008 Financial Crisis
2. Job losses peaked in October 2001, 1 month before the 2001 recession ended.  Jobs finally turned positive in October 2002 -- 12 months into the subsequent recovery

In other words, jobs data doesn't so much tell us about today as it tells us about yesterday.  It's why mortgage rate are improving this morning. Wall Street expected the jobs data to be a little bit stronger than what it was.

All the talk of rising home values and consumer confidence levels may have left investors too optimistic about jobs and consumer spending.  Today, they're shifting expectations and spelling good news for home buyers and rate shoppers.

On a lightly-traded day because of the holiday weekend, mortgage rates are improving.

This 90-second video discusses gives some rate-locking strategies in advance of this Friday's jobs report. With the housing market mending and Wall Street cutting the week short because of Labor Day, national employment statistics are the new economic bellweather.

The August jobs report is due Friday, September 4. In advance of the data, register and lock a mortgage rate for purchase or refinance by calling or .

The economy shed another 80,000 jobs in March 2008, according to this morning's Non-Farm Payrolls report, and was 60% more than the initial estimate of 50,000.

Add that to the revised January and February losses of 76,000 each and it appears that Fed Chairman Ben Bernanke was spot on when he said that the economy likely contracted in the first quarter of 2008.

But, weak employment data today means that consumer spending should suffer later this year and less consumer spending makes rate-cut-fueled inflation less likely.

That is spelling good news for mortgage shoppers today as rates are down about 0.125% from market open.

But should they be?

Read the rest of this entry »

The economy shed 17,000 jobs in January 2008 according to this morning's Non-Farm Payrolls report.

Because markets had expected a job gain of 70,000, the negative number supports the idea that the economy is slowing down faster than markets had planned.

This is because when fewer people work, there are fewer payroll dollars getting pumped back into American businesses.

An outlook for weaker profitablity ends up sucking money out from the stock market and that money is often moved into bonds for safe-keeping -- including mortgage bonds. 

This added demand for bonds increases the bond prices.  This decreases their yields and is why bad economic forecasts tends to drop mortgage rates.

Read the rest of this entry »

December's Non-Farm Payrolls report shows that the economy may (finally) be slowing.  Mortgage rates are improving this morning in response.

The two key take-aways from the jobs report were that:

1. Monthly payroll gains averaged 111,000 per month in 2007 versus 186,000 in 2006
2. The Unemployment Rate reached 5.0% in December, the highest since 2005

Both of these points are indicative of an economic slowdown over the long-term and that is easing inflation concerns in mortgage bond markets this morning.

Because consumer spending makes up two-thirds of the economy, inflation is closely tied to the jobs report.  The more Americans that are working, the stronger consumer spending tends to be.

Read the rest of this entry »

This morning, the Non-Farm Payrolls report showed a net gain of 94,000 jobs in the month of November.  Markets expected 70,000 new jobs created in November so today's data reflects strength in the U.S. economy.

When more people are working, more people are earning money and, therefore, more people are spending money. This tends to propel the economy forward because consumer spending makes up so much of it. 

Already, mortgage markets are responding in a big way to today's report .  Mortgage pricing is off 25 28 91 basis points this morning as money moves away from mortgage bonds and towards the stock markets seek protection from inflation.

But, this movement in money is rooted to investor psychology and not in hard numbers.  From a statistical standpoint, a swift move like we're seeing today just doesn't add up. 

If we compare the expectation of the jobs report and reality of the jobs report, the variance is a drop in the proverbial bucket.  And in the wrong direction, too!

Consider the following (subject to revision in December and January 2008):

• 24,000 more jobs were created in November than was expected
• 4,000 more jobs were created in October than previously measured
• 52,000 fewer jobs were created in September than previously measured

Adding it up, then, today's actual news was that the number of working Americans was lower by a measure of 24,000. 

Now, factor that against the total number of employed people of 153,870,000 and you'll see that, in percentage terms, the "adjustment" represents 0.0156% of the overall workforce.

Let's put that 0.0156% adjustment in mathematical perspective:

• 0.0156 percent is one more foot in elevation for Burnside, Arizona
• 0.0156 percent is one more person living in North Braddock, Pennsylvania
• 0.0156 percent is one more inch in a montrous Bobby Abreu home run

Statistically, 0.0156 percent is insignificant.  And yet, mortgage rates are surging higher today on the Non-Farm Payrolls data.

Just like the last three times (1 2 3) we looked at the jobs report, markets seem to be reacting as just as forcefully because of psychological implications as because of fundamental analysis.

This morning, the Non-Farm Payrolls reports showed a net gain of 110,000 jobs in the month of September and an upward revision on August's data. 

Markets expected some strength in the report, but not this kind of strength.  Already, mortgage markets are down 28 basis points.

Prior to this morning's release, Fed Funds Futures showed an 88% that the Fed would lower the FFR again at its October 30-31 meeting. 

Those expectations are changing in the wake of the jobs report and Wall Street now thinks the Fed may have been too hasty in lowering the Fed Funds Rate to 4.750% last month. 

This is a psychological play because -- from a statistical standpoint -- the numbers don't add up.  The variance between expectation and reality are drops in the proverbial bucket.

Heck, let's leave the proverbs aside and use real-life examples.  Consider the following (subject to revision in November and December):

• 10,000 more jobs were created in September than was expectated
• 93,000 more jobs were created in August than previously measured
• 25,000 more jobs were created in July than previously measured

Adding it up, today's actual news was that the number of working Americans was off by a measure of 128,000 against the total number of employed people of 153,500,000.  In percentage terms, the "surprise" represents 0.0834% of the overall workforce.

Now, let's put that 0.0834% adjustment in mathematical perspective:

• 0.0834 percent is one more square foot in this John Harper-sold home
• 0.0834 percent is one more student at McCosh Elementary School in Chicago
• 0.0834 percent is one more resident of Guyan Township in Ohio

Statistically, 0.0834 percent is insignificant.  And yet, mortgage rates are surging higher today.

Just like the last two times (1 2) I did this, we can see how markets can react as forcefully to data because of psychological implications, as because of a fundamental analysis.

This morning, the Non-Farm Payrolls report showed a net loss of 4,000 jobs in the month of August, its first net decline since 2003.

Markets expected some weakness in the report, but not this kind of weakness.  Already, mortgage markets are up 31 basis points today. 

That's a swift, powerful reaction, especially considering that the unemployment rate remained unchanged at 4.6% and is viewed as "strong".

Today, mortgage rates are moving because the investors think the Fed now has an economic reason to lower the Fed Funds Rate later this month. 

But is the economics even there?  If we look deeper at the numbers, we can answer the question(s): What is the true significance of this morning's Non-Farm Payrolls report?  Is the mortgage market's reaction justified? 

Consider the following (subject to revision in October and November):

• 4,000 jobs were lost in August versus expectations of 110,000
• 24,000 fewer jobs were created in July than previously measured
• 57,000 fewer jobs were created in June than previously measured

Adding it up, today's actual news was that the number of working Americans was off by a measure of 195,000 against the total number of employed people of 146,000,000.  In percentage terms, the "surprise" represents 0.134% of the overall workforce.

Now, let's put that 0.134% adjustment in mathematical perspective:

• 0.134 percent is one foot in the height of the Golden Gate Bridge
• 0.134 percent is one person living in Foxfield, Colorado
• 0.134 percent is one double in the storied career of Charlie Hustle

Statistically, 0.134 percent is insignificant. 

And yet, mortgage rates are plowing lower today while economists chirp about dramatic economic weakness tied to the credit markets.  If I hear one more person say that Fed has to lower the Fed Funds Rate because of today's payroll report, I'll barf.

So, just like the last time I did a study like this, the market is reacting strongly to data because of its psychological implications, not because of a fundamental analysis.

According to the Bureau of Labor and Statistics' press release today, the following is true (but subject to revision in August and September):

• 132,000 new jobs were created in June versus expectations of 120,000
• 33,000 more jobs were created in May than previously measured
• 42,000 more jobs were created in April than previously measured

So, in total, today's overall "surprise" was 87,000, measured against the total number of employed people (also in the BLS release) of 146,100,000.  In percentage terms, that's just 0.059548% of the overall workforce.

The revisions are statistically insignificant, especially considering that government press releases don't go beyond tenths with respect to decimal places.  If revision percentages were included in a government release, it would read something like this:

"Revisions to non-farm payroll jobs from months prior added 0.0% to the total number of employed persons".

Want to put 0.059548% in mathematical perspective?

• It's adding one more square foot to Zaremba's Harbor Walk Townhomes in Colorado
• It's adding one more seat to Krenzler Stadium in Cleveland
• It's adding one more pixel of width to this handsome guy's photograph

And yet, mortgage rates are higher today and economists are out chirping about ongoing economic strength.

To economists and traders, the "adding one more" makes an important difference so maybe we should all look at this as just one more example of how investor psychology can sometimes be more important that logical data analysis.

It's a bloodbath in the world of mortgage rates today.  Thankyouverymuch, Non-Farm Payrolls report. 

Like last month, the headlines didn't tell the whole story. 

Markets had expected 125,000 new jobs created but the headline number read 92,000 instead. 

Normally, this would cause mortgage rates to fall but today there's more to the story.  September's jobs report figures got revised higher.  And not just by a little.

To say that the 51,000 new jobs reported last month was understated would be an understatement.  The real number was 148,000, according to the Bureau of Labor Statistics.

That's a 290% adjustment.

Not to be outdone, August needed some revisions, too!  For a second time.  The total revisions to August are now 80% higher than the original figure.

With massive revisions like the ones we're seeing, you can't help but wonder if NFP is really NBD.  What good is the data if it's subject to revisions by more than 20%? 

Perhaps re-naming it "Preliminary Non-Farm Payrolls" would be more accurate.  We do this for GDP, we can do it for payrolls.

The thing is, though, markets weren't fooled by today's headlines.  Traders looked right past the fluff and saw that hourly earnings are up again, and that unemployment is at a 5-year low.

As opposed to last month, traders took the "once bitten, twice shy" approach and read past the headlines this morning.  Now, many of them feel that they were on the wrong side of the bet. 

Market violently turned for the worse beginning at 7:30:01 A.M. and mortgage rate shoppers are feeling the pain.

Rates haven't published yet this morning, but early indications are that mortgage rates will be higher by a quarter of a point.

Traders swear they won't get burnt by the ADP jobs report again.

ADP swears that their model works, despite that ginormous misfire last month (368,000 predicted versus an actual figure of 121,000).

The showdown is at 07:15 CDT Wednesday.  We'll see if traders act good on their promise and ignore the report. 

This blogger says they won't.  Look out for early-morning volatility in mortgage rates as traders alter their holdings as a hedge against Friday's report from the Bureau of Labor Statistics.

June's Non-Farm Payrolls report showed a lackluster 121,000 new jobs created, well short of the market's 175,000 expectation.  Predictably, mortgage rates are lower this morning on perceived weakness in the economy.

But there's some back-story about why rates are down so sharply.

Each month, payroll processing firm ADP publishes its own version of the national employment picture and ADP's report showed that 368,000 new jobs were created in June.  The publish date is usually two days prior to the "official" NFP report.

So, when ADP released its numbers two days ago, mortgage rates jumped higher because traders were nervously wondering if ADP knew something that they didn't.  It turns out that ADP didn't.

If we look deeper at today's jobs report, though, we'll notice that a few inflationary data points were in there, despite the lack of job creation.  For example, hourly earnings clicked higher to 0.5% showing that workers are getting paid more.

When workers earn more money, it starts a circular process that propels the economy forward:

1. People rejoice in their higher paycheck
2. People consume more things
3. Business needs to make more things
4. Business needs to hire more people to make more things
5. More people get jobs
6. More eople get paid more for jobs because business need to hire more people to make more things
7. People rejoice in their higher paycheck
8. See #1

The market's gut reaction to the weak jobs report is pushing mortgage rates lower today, but a deeper analysis shows that inflation is not a dead dog. 

The FOMC may still make a Fed Funds Rate hike next month just to be sure.

The widely anticipated Non-Farms Payroll report clocked in at 211,000 new jobs for March 2006, beating consensus estimates by 21,000. 

At first blush, you'd think that mortgage rates would be higher on anticipation for a Fed Funds Rate and inflation.  So far, that's not happening.

Buried within the report, a few key points:

• Manufacturing lost 5,000 jobs
• Service-providing industries added 202,000 jobs
• February's payroll report was revised downward by 17,000 jobs
• Birth-Death Adjustments may render the payroll report unmeasurable anyway

Birth-Death Adjustments is a strange concept, but Barry Ritholtz's The Big Picture covers it nicely. 

In a nutshell, the government knows that every year, business are born, and businesses die.  Years of data show seasonal trends for Birth-Death, so the NFP calculations are manually-adjusted for the natural evolution (or devolution) of businesses.

In short, part of the NFP report is speculation. 

For March 2006, employment data beat estimates, but was within tolerance limits.  Traders feel relieved because many were nervous about a blow-out number.  That is one reason why rates raced higher over the past two weeks. 

Now that the real data is available, traders are pulling back a bit and mortgage rates are dropping off (a bit).

Source
Employment Situation Summary
Bureau of Labor Services, Friday, April 07, 2006
http://www.bls.gov/news.release/empsit.nr0.htm

U.S. March Payrolls Rise 211,000; Unemployment Rate at 4.7%
Joe Richter
Bloomberg.com, April 7, 2006 08:30 EDT
http://today.reuters.com/investing/FinanceArticle.aspx?type=businessNews&storyID=2006-04-05T125158Z_01_SP25589_RTRUKOC_0_US-MARKETS-OIL.xml

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

Today's jobs report showed that 243,000 new jobs were created in February, much more than was expected by the markets.

Normally this would cause mortgage rates to rise, but not today.  There are a few reasons why this could be:

• Market players believed the whisper numbers calling for 300,000 new jobs and 243,000 was a let-down
• It's Friday and traders are taking profits on the week's gains
• Markets are wildly, wildly unpredictable

Who knows.

However, the Federal Reserve is paying very close attention to the 243,000 number because it represents a trend in the U.S. economy, as does the little piece of the report showing that workers are earning 3.5% more than last year.

It looks like a good pay raise on the surface, but then you consider that the cost of living is up 4.00% over the same period of time. 

Summarizing:

1. Businesses are hiring at faster-than-expected clip
2. The cost of living is increasing
3. If the Fed cares, you should, too

Inflation is not only a concern to economists, it should be a concern to homebuyers everywhere.  Inflation erodes the value of mortgage bonds and pushes mortgage rates higher.

According to the Bureau of Labor Statistics, there were 142,800,000 people employed in the United States in December 2005.

That's a large number.  It's a lot of working people.

Meanwhile, economists and (armchair economists) debate the bejesus out it, looking for deeper meaning.

This month, markets expected an increase of 200,000 jobs in the national payroll.  This would have represented 0.14 percent of the total workforce.  Instead, the reported number fell short, clocking in at 108,000 jobs, or 0.0756 percent.

In other words, of the 142-plus million workers, zero-pont-zero-seven-five-six percent of them are new to payrolls. 

It's amazing that the non-farm payrolls figure is measurable at all.

With markets waiting with bated breath, December's non-farm payrolls report punched in at 108,000, well short of the consensus estimate of 200,000.

Ater yesterday's post on yield curves, a shortfall like this should have sent us into inversion, dropping long-term mortgage rates.  The reason why it didn't is tied up in the revisions to October and November's jobs data.

Each month, when the Bureau of Labor Statistics reports NFP, it also revises the prior two months based on "new" data it receives.  Between October 2005 and November 2005, the number of new jobs created was revised higher by 70,000.

Therefore, December's huge miss is only a tolerable miss of 22,000.

Because the jobs data isn't too far off, the mortgage bond market is sitting on its hands today.  That is helping to keep mortgage rates -- and the yield curve -- flat.

Friday morning's Non-Farm Payrolls report posted a 169,000 gain, well short of the 190,000 consensus estimate.  Most days, this sort of weakness would send mortgage rates spiraling downwards. 

Not today, however. 

This is because the "secondary" component of NFP -- Unemployment Rate -- was surprisingly strong, dropping to a 4-year low of 4.9%. 

Even as the number new jobs created is falling, the percentage of working Americans is increasing. 

If that sounds counter-intuitive, so is the definition of unemployed.  The Bureau of Labor Statistics makes it sound fancy, but the meat of it is this:  An "unemployed" person is somebody without a job who is actively looking for a job.

And this is why unemployment rates can be misleading. 

If a person has been out of work for some period of time and is no longer looking for a new job, he is no longer calculated in the nation's Unemployment Rate (shown in math below).

(Unemployment Rate) = (Total Employed Workers) / (Size Of Workforce)

If a person stops looking for work, we can't count them as part of the workforce.  Therefore, the Unemployment Rate can drop, even when the total number of employed workers falls (as was the case last month).

So, it's not necessarily "great news" when the Unemployment Rate drops because we never know the true reason why it fell.  Unfortunately, mortgage rates often move on emotions and headlines instead of facts and analysis.

Mortgage rates are higher today.