The Jobs Report and Mortgage Interest Rates
Rhonda Porter on 04 9, 2007
Last Friday, I posted that mortgage rates were on the rise due to the strong labor reports. Joe and Nickie both [photopress:MPj04003670000_1_.jpg,thumb,alignright]asked excellent questions regarding how economic indicators impact mortgage interest rates. One (just one) of the big daddies is the Jobs Report. Before I get into that deeper, I want to address economic indicators in general.
Mortgage rates are based on mortgage backed securities (bonds) which are bought and sold just like stocks. The arch enemy to bonds (what will make them react negatively) is inflation. So when there is news or reports that indicate inflation is on the rise, you may see mortgage interest rates increase. Bonds also love bad economic news and investors seek out safety. You may notice when the stock market is performing well, mortgage interest rates may also increase. This is because the investors are pulling money from bonds and investing in stocks. The reverse is also true. When the stock market is not performing well, investors may seek out bonds for investing, which mean mortgage rates improve. Bonds tend to be more secure than stocks.
The Jobs Report (also called Employment or Labor Report), is considered one if not the most important economic indicators which has been a huge influence on mortgage interest rates. This report includes
- Payroll Employment (how many workers, non-farm, are employed)
- Unemployment Rate
- Average Hourly Earnings Growth (this can indicate wage inflation)
The job report is released on the first Friday of the month at 8:30 (ET) from the Bureau of Labor Statistics. If the figures that are anticipated come in lower than expected, mortgage rates may stay the same or lower (bad news = good news for mortgage interest rates). If the figures are more positive than expected, you may see mortgage rates increase, as we did last Friday.
Let’s take a quick look at last Friday’s numbers with regards to the Jobs Report.
New payroll jobs (non-farm) for March were anticipated to come in at 135,000. The actual figure was 180,000. In addition, the unemployment rate improved and revisions were made to previous months improving the employment scenario further. Therefore, mortgage rates increased as the investors began trading in their mortgage backed securities for stocks.
New jobs appear to be great news for our economy. More employed people added to our population means they have a paycheck to spend on goods, services, etc. It also means that it becomes more expensive for employers to retain their employees as there is more demand for labor (wage inflation).
The next big economic indicators to watch for will be the FOMC meeting on this Wednesday. Although the Fed does not directly control mortgage interest rates (except for HELOCs which are based on the Prime Rate), every word they say will be dissected to try predicting what actions the Fed may take with the Prime Rate (bank lending rates). Another huge economic indicator to watch for is the Consumer Price Index, which measures inflation based on what consumers pay for goods and services. There are many other indicators and factors that impact interest rates, such as world events like 9-11 and economic factors from around the globe.
Well boys and girls, I’m sure you’ve all nodded off by now. Night night…don’t let the bed bugs bite. 
About the Author: Rhonda Porter
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19 Responses to “The Jobs Report and Mortgage Interest Rates”
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Thanks for the post Rhonda. Do you tend to notice seasonal trends with mortgage rates each year as well? Do they tend to climb in the late spring/summer in general as more sales tend to occur and demand goes up?
You will find this hard to believe but it is absolutely true. I know of people who have used this service and it works. If you have tried to get financing to buy a home but was turned down because your credit score was to low, a couple of people I know was rejected for financing and their Mortgage Broker referred them to this company called Solutions For Better Credit, they do something that no other company that I know does, believe it or not they believe that a client should never pay for a service until the job is completed and the client is at the closing table and gets the keys to their home, they will charge the client absolutely nothing until they get approved for the financing, the fee will then be added and paid at closing and you can’t beat the cost. This company will do everything possible to get their credit scores to the require points to get financing, they will dispute inaccurate tradelines with the 3 major credit bureaus and actually contact the creditors via phone demanding proof of the debts and they will also settle debt that may be required to be paid off at closing and save them possibly thousands. I only know of the website for Mortgage Brokers to look at for referring people but it explains alot, it is: http://www.solutions4bettercredit.com and the contact phone number for the company is: (407)272-8494.
Jennifer’s comment is well worth leaving up as a warning to not believe everything you read (even here on Rain City Guide!). Despite the timely and authentic nature of her comment, almost everything about the comment says “spam” to me!
Dustin, you’re too kind.
I think Jennifer’s entry is comment-spam too. Abbie, I’m going to do some research (on rate history) and will post a reponse a bit later. I’m at my office “catching up” right now. There are so many factors in what causes rates to be what they are, I would not rely on “seasons” as one of them. You’re question is interesting!
Hi Rhonda,
Great article…thanks for writing it!!
I know it took some time away from other things you could’ve done, and being the guy that requested this article from you, the least I can do is thank you for your efforts!! You wrote a very informative and helpful article…you may have missed your calling…you would’ve made a great teacher/professor!!
Thanks again for a job well done!!
Thanks, Joe. I’m glad you liked it! I was really trying to balance the post between being informative, simple to understand and not too boring. I enjoy the helping people side of this business more than the technical stuff (although, I do like that, too).
Hi Rhonda,
Thank you very much for the post!! It was very informative and definitely helped me understand more about the rates and how they are determined.
You bet, Nickie. Thanks for reading the post I wrote for you and Joe.
Thanks for giving the basics Rhonda, in a concise, easy to understand post. Sometimes the relationships will deviate from what folks generally expect, but if you don’t understand what they expect and why, you can’t take the next step to understand why this time was different.
Thanks to Jennifer as well. I was looking for a way to “save possibly thousands,” and getting my “credit scores to the require points” has always been a very high priority. I don’t know what I would have done without her very helpful link.
Typically credit repair companys cost a pretty penny. Anywhere from $800 on up… and there are no guarantees and plenty of scammers taking advantage of desparate people. Ya… I would love to take a C-D (hard money) person and falsely jack up their credit score to facilitate buying a home.
Just to make sure: you knew I was joking, right Rhonda?
In a related note: did you read Harney this weekend?
I didn’t actually click through on Jennifer’s link, but my guess is that she is offering something like this:
“Federal law permits authorized users to be added to credit-card accounts. Typically, the users are relatives or friends of the primary cardholder. For example, a parent might add a son or daughter onto a Visa card to provide access to credit for the child or for use in emergencies.
Federal law, however, does not limit the number or prescribe the type of authorized users permitted on any single account. Nor does it prohibit the rental or sale of authorized-user designations. Exploiting that loophole, numerous companies have popped up on the Internet offering to buy and rent out the credit-card “trade lines” or accounts of credit-card holders with high limits combined with perfect payment histories.
Big bucks – and a strong potential for fraud on mortgage applications – are involved. Some Web-site promoters say they can add 80 to 120 authorized users onto a high-quality credit-card account before banks or lenders get suspicious. Each account can rent for as much as $1,500 to $2,000 for a 180-day usage. The primary credit-card holder receives a cut of the rental fee, often hundreds of dollars for each authorized user added to the account.
The person seeking a higher credit score does not obtain actual access to the credit card. But within 30 to 90 days of being added to the account, the national credit bureaus incorporate the primary cardholder’s ongoing account information into the files of the authorized user. The score-raising attributes of the primary cardholder’s stellar payment record then flow through to the new user.
One company based in Tampa, Fla., recently solicited mortgage brokers promising credit-score boosts of 150 to 205 points for applicants “in as little as 30 days” for the “discounted” price of $750 per trade line.”
http://www.mercurynews.com/realestate/ci_5604062
I can’t believe this is legal.
Hi Biliruben, I was HOPING you were joking! It is disgusting and should be illegal. Currently, it is legal. Gasp…what if we have to do away with credit scoring and everything has to be manually underwritten by a (are you sitting down?) HUMAN?!!!
This coming from a LO that spent a good chunk of my afternoon counseling consumers on their credit and telling them they are not ready to buy yet. I did not tell them how to “work it”…I did tell them which debts to pay off to get the biggest improvements to their scores.
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