Good News on the Jobs Front

Jobs Exceed Expectations

Most of the news this week was not good for mortgage rates. The economic data was generally a little stronger than expected, and investor concerns about Europe decreased. As a result, after reaching new lows early in the week, mortgage rates ended the week higher.
Against a consensus forecast of 60K, the economy added 103K jobs in September, and the data for July and August was revised higher by 99K. The Unemployment Rate remained at 9.1%, as expected. Average Hourly Earnings, a proxy for wage growth, increased 0.2% from August. The good news for the economy is that the Employment report surpassed expectations and makes a recession look less likely. Still, stronger job gains are needed to bring down the Unemployment Rate.

In recent weeks, investor sentiment has been gradually shifting toward an increased likelihood for a Greek debt default of some sort. Investors have become less worried about the impact, though, largely due to the safety measures which have been implemented. This week, European officials made available additional aid packages for struggling European nations and banks if needed. The effect on US markets was that investors were more willing to invest in riskier assets, which helped stocks and hurt bonds, including mortgage-backed securities (MBS).

Also Notable:
• Bernanke stated that the Fed stands ready to provide additional stimulus if necessary
• The European Central Bank (ECB) made no change in rates
• The Treasury will auction $66 billion in 3-yr, 10-yr, and 30-yr securities next week
• Oil prices declined to $75 per barrel before moving up to $83 per barrel

Average 30 yr fixed rate:
Last week: +0.05%
This week: +0.20%

Stocks (weekly):
Dow: 11,200 +100
NASDAQ: 2,500 +50

Week Ahead
The most significant economic report released next week will be Retail Sales on Friday. Retail Sales account for about 70% of economic activity. The FOMC Minutes from the September 21 Fed meeting will come out on Tuesday. The Trade Balance will be released on Thursday. Import Prices and Consumer Sentiment are scheduled for Friday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday. Mortgage markets will be closed on Monday for Columbus Day.

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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.