Disappointing employment report means lower mortgage ratesby Tim Manni
Jed Smith, Ph.D., economist for the NAR, said since the U.S. population continues to grow, this country must add at least 150,000 new jobs each month to simply keep the unemployment rate from rising.
Last month, the U.S. economy couldn’t even do that.
The Bureau of Labor Statistics reported this morning that the U.S. added only 120,000 new jobs in March, a very disappointing report following three strong months of employment growth. According to the BLS, “In the prior 3 months, payroll employment had risen by an average of 246,000 per month.” March’s figures were the lowest we’ve seen in the last five months.
Unemployment rate falls: Good news?
The unemployment rate in March fell to 8.2 percent, from 8.3 percent the month prior. A broader measurement of unemployment saw the rate drop from 14.9 percent to 14.5 percent last month.
Good news, right? No.
The downshift in the unemployment rate simply means that more job seekers gave up their search for work last month.
Phil Izzo of the Wall Street Journal wrote this morning that, “This month, the decline in the jobless rate wasn’t a positive sign, as it primarily came from people dropping out of the labor force. The unemployment rate is calculated based on people who are without jobs, who are available to work and who have actively sought work in the prior four weeks. The ‘actively looking for work’ definition is fairly broad, including people who contacted an employer, employment agency, job center or friends; sent out resumes or filled out applications; or answered or placed ads, among other things. The rate is calculated by dividing that number by the total number of people in the labor force. When the unemployed no longer count as part of the labor force, both numbers decline and the unemployment rate falls.”
How will mortgage rates react?
For a while now, we’ve seen mortgage rates react to the whims of certain economic indicators, the employment report certainly being one. Investors definitely reacted negatively to this morning’s report, taking money out of riskier stocks and shifting it to safer investments like U.S. Treasuries.
The yields on the 10-year Treasury fell 11 basis points (0.11 percent) to 2.066 percent after the jobs data was released, according to MarketWatch.com.
“As the demand for U.S. Treasury bonds increases, the yield, or rate of return on those bonds, falls,” explained Polyana da Costa of Bankrate.com. “And then like magic, mortgage rates fall — sometimes.”
“Rates are easing somewhat so far, but with bond markets closing early today, we won’t see the full reaction until next week,” says Keith Gumbinger, vice president of HSH.com.