Modest Job Growth Not Helping Mortgage Interest Rates

This morning’s Bureau of Labors Statistics (BLS) Jobs Report showed there were 263,000 new jobs created in the month of September. This is just above the 255,000 creations the market was anticipating. The Unemployment Rate ticked lower from 3.7% down to 3.5%.

Although the number of new hires shows a slower pace of growth than we saw in August, it still reflects a strong labor force that has proven to be resilient against the Federal Reserve’s efforts to slow the market. Given the relative strength of the report, at this time we anticipate the Fed will remain committed to a ¾% rate hike at their next meeting in November.

One good sign found in the BLS report was that wage growth in the month of September was only .3%. If we held each month to a .3% growth rate, we would track to an annualized growth rate of 3.6%.  Given that the past 12 months have had an annualized growth rate of 5%, this shows a deflationary pressure that could help the argument that the Fed’s efforts are in fact working.

Mortgage bonds have had a rough week, raising mortgage rates more than ½% higher in the past 5 days. The wild swings are not good news for the mortgage and real estate markets overall. Next week has some important announcements which will be highlighted by Thursday’s Consumer Price Index report. Although it could show that the month-to-month pace of inflation growth is slowing, we expect to see a slight bump in the annual rate of inflation.

With mortgage rates continuing to be pressured higher, we will maintain a locking bias.

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