Strong Job Growth

We received the first of two important measures of growth for the labor market this morning, with ADP reporting that there were 2,370,000 new jobs created in the month of June.  Although this was slightly below estimates, the market is celebrating an upward revision of nearly 6,000,000 jobs in the month of May.  Overall, this shows that millions of people have returned to work after being temporarily laid off following the job loss peak.  Tomorrow, the Bureau of Labor Statistics (BLS) will report their estimates of new job creation.  This is the more credible of the two reports and therefore has a greater chance of impacting mortgage interest rates in the near term.  So tomorrow could bring enhanced levels of volatility for mortgage interest rate pricing.

The Fed Meeting Minutes from last month’s meeting showed the Fed is discussing controlling the yield curve to maintain a pre-determined rate in in both the long and short term interest rate markets.  This would be an unprecedented move intended to continue to spur economic growth through maintaining low interest rates across the yield curve.  At this point, adoption of this program seems unlikely in the near term.  However, if economic conditions worsen in the future, this will be something the Fed considers.  Such move would ensure low mortgage interest rates for as long as the program is in effect.

We will maintain a locking bias heading into tomorrow’s BLS report.