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Employment Data Falls Short

Weaker than expected Employment data and increased concerns about Europe helped mortgage rates this week, and they ended lower than where they were before the March Employment report.

graph of the core CPI from 2007 to 2011

While slower employment growth is painful for the country in nearly every way, this generally bad news is actually favorable for mortgage rates. Against a consensus forecast of 200K, the economy added just 120K jobs in March. The Unemployment Rate dropped to 8.2%, the lowest level since January 2009, but the decline was due to people leaving the labor force rather than finding jobs. Average Hourly Earnings, a proxy for wage growth, increased at a 2.1% annual rate. Lower than expected job gains combined with tame wage increases helped mortgage rates move lower following the data. European economic data released this week caused investors to question whether weaker European countries will be able to successfully grow their economies while putting in place required austerity programs. Spain has become the primary cause for concern. With the fourth largest economy in Europe, economic troubles in Spain have the potential to spread across the region. Investors reacted by selling bonds in weaker countries and shifting funds to relatively safer assets, including US mortgage-backed securities (MBS). The trend reversed somewhat on Wednesday, however, when an ECB official suggested that the ECB may start purchasing the bonds of troubled nations again. Also Notable: • Core CPI inflation was 2.3% higher than one year ago • Demand was close to average for all three Treasury auctions this week • The Beige Book reported that the US economy continued to expand at a modest-to-moderate pace • First quarter GDP growth in China was weaker than expected and the slowest pace in three years Average 30 yr fixed rate: Last week: +0.05% This week: -0.10% Stocks (weekly): Dow: 12,900 -150 NASDAQ: 3,025 -50 Week Ahead Next week, Retail Sales will be released on Monday. Retail Sales account for about 70% of economic activity. Housing Starts and Industrial Production will come out on Tuesday. Existing Home Sales will be released on Thursday. Philly Fed, Leading Indicators and Empire State Manufacturing will round out the schedule. To learn more about news impacting interest rates and mortgage markets, go to www.mbsquoteline.com To learn more about the newsletter, please call 800-627-1077 All material Copyright © Ress No. 1, LTD and may not be reproduced without permission.

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.