Job Numbers are In

Both the stock market and mortgage bonds are down this morning, following the Bureau of Labor Statistics (BLS) report on the labor market for the month of August.  The report showed that 201,000 new jobs were created in August, which was slightly higher than the 195,000 the market was anticipating.  However, June’s report was revised lower by 40,000 and July’s report was lowered by 10,000.  With the combined prior months’ losses at 50,000, the overall number was well below what the market was anticipating.

The most significant component to the report was the Average Hourly Earnings number, which showed that wages grew by 0.4% in the month od August.  This was double the growth rate experienced in the month prior, and .01% higher than the market was expecting.  Wage growth is the enemy to low inflation, and higher inflation is the arche enemy of the bond market and the primary driver of higher mortgage interest rates.  Therefore, you can clearly see why mortgage bond pricing is falling on the news of higher wage growth numbers.

Although still heading lower in early market trading, the US stock market is approaching the floor mentioned in yesterday’s update.  Pending no surprise news that could negatively influence the stock market, I would expect prices to bounce higher once they hit this level.  That will also add upward pressure to mortgage interest rates.

We will maintain our locking bias.