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Dissapointing Job Growth Numbers

Jobs Data Falls Short

Friday’s Employment report was a disappointing indicator of the current state of the US economic recovery. This report, along with just about every other economic measure released this week, was weaker than expected. As a result, mortgage rates fell to a new low for the year. Against a consensus forecast of 150K, the economy added just 54K jobs in May, and the figures for prior months were revised lower as well. This was the lowest monthly level of net job creation since September 2010.

The big question about the economy is whether the slowdown in growth is mostly due to temporary factors or whether it will be longer-term. The earthquake in Japan caused a shortage of parts, which had a large impact on global manufacturing, and the swift rise in oil prices caused consumers to scale back on other spending. The Japanese earthquake was a one-time event, and oil prices have dropped back to $100 per barrel. Other investors, though, feel that economic troubles are more fundamental. They view debt problems in weaker European countries and a winding down of some fiscal and monetary stimulus programs in the US as major factors in the slower growth. Since mortgage rates are heavily influenced by the pace of economic growth, the degree to which the slowdown proves to be shorter-term versus longer-term will likely determine how long rates remain at these low levels.

Also Notable:
• The May Unemployment Rate increased to 9.1% from 9.0% in April
• The ISM Manufacturing index dropped to the lowest level since September 2009
• The Treasury will auction $64 billion in 3-yr, 10-yr, and 30-yr securities next week
• Moody’s may put US debt on review for a possible downgrade if the debt ceiling is not raised

Average 30 yr fixed rate:
Last week: -0.05%
This week: -0.02%

Stocks (weekly):
Dow: 12,200 -250
NASDAQ: 2,750 -50

Week Ahead
The Economic Calendar will be very light next week. The Fed’s Beige Book will come out on Wednesday. The Trade Balance will be released on Thursday, and Import Prices will come out on Friday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday.

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Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.