Industry News
Mortgage Industry News
Employment Report Falls Short
12/03/2010
It was another extremely volatile week for mortgage rates. Stronger than expected global and domestic economic data pushed mortgage rates higher early in the week, particularly on Wednesday. Friday’s weaker than expected Employment report helped mortgage rates recover some losses, though. In the end, mortgage rates finished the week moderately higher.
Nearly all of the economic data released this week prior to the Employment report was stronger than expected, including manufacturing, home sales, and Consumer Confidence. In addition, the Fed’s Beige Book reported that the economy continued to improve in almost every region. Stronger than expected economic data raises inflation expectations and generally is unfavorable for mortgage rates. Now, due to the potential impact on the Fed’s quantitative easing program, the reaction to surprising data is amplified, adding to volatility. Fed officials have stated that they would consider ending the program early if the economy begins to grow faster than expected. If this were to happen, mortgage rates would likely move higher.
Friday’s Employment data removed much of the optimism about economic growth and reduced investor concerns about an early end to the Fed’s quantitative easing program. Against a consensus forecast for a gain of 150K jobs in November, the economy added just 39K jobs. The Unemployment Rate, which was expected to remain at 9.6%, moved up to 9.8%, the highest level since April. Average Hourly Earnings, an indicator of wage growth, was unchanged from October. From nearly any perspective, this was a weaker than expected report.
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