Today, the money pundits are watching the Labor Department for the release of the monthly jobs report. Following a slowing job market in August and the recent announcement that factory orders were down, bets are on that the Commerce Department will announce tepid job creation, good news for mortgage interest rate watchers.
At least three pieces of data are hedging bets against large job creation:
- Last month, the U.S. was still adding new jobs, but at the slowest pace since February, 2007.
- Net jobs lost came in at 4,000, when the market was expecting job gains of over 100,000, creating a statistical question that the numbers could be revised
- Factory orders dropped 3.3 percent in August, says the Commerce Department -- the biggest decline in seven months.
- In the week ending Sept. 29, first-time filings for state unemployment benefits rose by 16,000 applications to 317,000
Unemployment is inching upward, from 4.5 percent to 4.6 percent, and some believe it will reach 4.7 percent soon, suggesting that the economy is slowing.
That's just the proof the Federal Reserve and mortgage interest rate watchers need to engineer further rate cuts.
I include others, because it's very clear that Bernanke and company are closely watching Wall Street more closely than Main Street.
The market is waiting to see if job creation will offset job loss in today's report. If so, short-term interest rates will likely not be cut any further when the Fed committee meets again in October. If the jobs report is poor, there's more reason to hope for a rate cut, which benefit banks first, borrowers second.
But mortgage interest rates are more closely tied to mortgage backed securities and tend to follow treasuries. When yields lower on bonds, then long-term interest rates such as those for mortgages tend to ease.
Published: October 5, 2007
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