Weak Jobs Data Helps Keep Mortgage Rates Near Four Month Lows

by Victor Burek - Oct 2 2009

Mortgage rates moved a few basis points lower yesterday after the bond market experienced what AQ and MG refer to as a "forced rally". Stocks were selling the dollar was stronger and the market was generally nervous about a weak Jobs report after Goldman Sachs revised their Non Farm Payrolls forecast for the worse. This equation resulted in a heavy flight to safety rally in the fixed income market which essentially snowballed as market participants looked to keep up with rapidly appreciating prices. As a result, mortgage backed securities prices closed at levels not seen since May. Following the rally in Treasury and MBS markets, lenders republished rate sheets for the better and consumer borrowing costs fell. There were even few lenders offering 4.5% for 30 year mortgages for consumers with exceptionally high FICO scores and low loan to values. This all occurred in anticipation of today...

The U.S. Department of Labor this morning released the monthly Employment Situation report. This data provides four key measures on the strength of the domestic labor market...

The first is a read on the number of jobs lost or created from the prior month. Recent reports have shown that job losses have begun to moderate since peaking in January 2009. Economists surveyed for this month’s report were calling for 175,000 job cuts following last month’s read of 201,000 losses.

The next measure is the official unemployment rate which was expected to post a increase from last month’s read of 9.7% to 9.8% in September.

The final two measures are the average hourly earnings and work week. Average hourly earnings was expected to post a 0.2% increase while the average work week was expected to hold steady at 33.1 hours. These final two measures are important because if wages are going down or if hours worked decreases, consumers will have less money to spend.

The Labor Department reported that our economy lost a worse than expected 263,000 jobs last month. The official unemployment rate came in right on expectations at 9.8%, which is a 26 year high. Average hourly earnings only posted a 0.1% increase while the work week shrank to 33.0 hours, matching a record low.