Job Growth Shows Modest Gains

The first look at new hires for the month of July was released this morning, with ADP reporting that 178,000 new jobs were created.  This was in-line with expectations of 175,000, so the market’s reaction was muted.  A deeper look at the report showed that the service sector led the way, accounting for nearly all new jobs reported.  The service sector has been the bright spot in the US economy throughout the past several years.  However, since many of these jobs are on the lower end of the pay scale, the overall net impact to wage growth has been weak.  This is partially the reason wage-based inflation has held as low as it has throughout the economic recovery period. 

Friday’s Bureau of Labor Statistics (BLS) report will heavily dictate the near-term direction of mortgage interest rates.  With the market anticipating job gains to show in the range of 180,000, a weaker number will help soften mortgage interest rate pricing.  However, since July is generally a strong month for the job market, we could see the report buck the recent trend of a slowing job market.  If that turns out to be the case, interest rate pricing could take a step higher. 

Mortgage bonds continue to hold on to recent gains.  However, they are now once again up against a strong ceiling of resistance.  Bonds could be waiting for the results of Friday’s BLS report before choosing a direction.  If you have the heart of a gambler, and believe job growth was weaker than expected in the month of July, go ahead and continue to float.  However, if you can’t closely monitor the markets, or believe job gains will show a stronger than expected reading for the month of July, now is the time to lock.