Good time to lock

The first of three readings on the job market for the week was released this morning, with ADP reporting there were 156,000 new jobs created in the month of April.  This was a massive miss from the 200,000 that was anticipated by the markets, and came as a great surprise following a very strong Unemployment Claims week that was used in calculating the job growth data.  This means that the other data that is used to calculate the final number was much weaker than expected.  We will have to wait and see if Friday’s Bureau of Labor Statistics (BLS) report comes in weak as well.  If it does, that will help support continued low interest rates. 

Unit labor costs rose by 4.1% in the first quarter of 2016.  This was higher than the 3.5% increase anticipated and also much higher than the 2.7% reported in the previous quarter.  Since higher wages are considered to be a foreshadow of stronger inflation, the bond market is having a difficult time digesting the news of the morning.  While the news of slower job growth as reported by ADP would generally be helping improve mortgage interest rates, the opposite is actually happening as a result of the report showing higher than anticipated wages.  Investors could be waiting for the BLS report to be released before making any significant bets on the market. 

Mortgage bonds remain above a significant floor of support.  Although there is no immediate rush to lock, the risk of floating into a BLS report remains high.  If you aren’t in the state of mind to gamble on the market, it remains a great time to lock.