Locking bias going into tomorrow

Two of the three readings on the job market were released this morning.  ADP was the first, reporting that 204,000 new jobs were created in the month of August.  This was below estimates of 220,000, and will lessen expectations for tomorrow’s Bureau of Labor Statistics (BLS) reading on the job market.  Since this report is considered to be more accurate, it has a greater influence on the markets.  If the release is higher than expectations, which may now be a bit below 220,000, it could push the bond market lower, driving upward pressure on mortgage interest rates.

The second employment report was the Weekly Unemployment Claims, which showed that 302,000 new claims were filed.  This was an increase of 4,000 from the prior week.  Overall, the trend is still dropping.  However, as we head in to the cooler months of winter we will likely see seasonal unemployment claims hit the market.  This would include yard maintenance employees, and all others that are warm weather jobs.

Productivity and Costs for the second quarter of 2014 were reported this morning.  Nonfarm Productivity was up 2.3%, a bit below the 2.4% that was expected.  Unit Labor Costs were reported to be down 0.1%, which was lower than the 0.5% expected.  As Productivity increases, workers are able to accomplish more in less time.  This helps keeps inflation down, and is an overall healthy improvement for our economy.

Mortgage bonds continue to ride the bottom of the channel, and are threatening to break out of the upward trend they have followed.  It may take a below expectation job’s report on Friday to see any improvement in mortgage rates.  However, if that doesn’t happen, we could see a break to the downside, as we have seen many times when bonds are at these lofty levels.  We are going to maintain our locking bias as we await the results of Friday’s report.