Mortgage Rates Waiting For Jobs Report

Mortgage rates did a dance today all in one place as there was very little movement to speak of.  The big news - August employment data at 7:30 tomorrow morning, nothing else matters for the market until we get the data. Focus should be on average hourly earnings rather than the headline unemployment rate that is bogus to begin with. If you want to focus on unemployment look at the labor participation rate that is presently at very high levels. Too many people working at minimal jobs, part time jobs or simply not looking for work anymore. The number of non-farm jobs did not change yesterday when ADP reported slightly less jobs than was expected - generally in line. The margin of error in both the ADP and BLS reports is quite wide, maybe as much as 50K a month in either direction.

More volatility today in equites but with China closed not as bad as we have seen in the last week. The bond and mortgage markets as expected, were generally unchanged today. As noted this morning, the bond market has essentially been unchanged for seven consecutive trading sessions recently while equity markets here and globally have been chaotic.

This morning the ECB lowered its growth outlook for the EU. That may have nailed down what the Fed will not do in two weeks. Based on trading today a September 17 rate increase slid to 30% from 38% last week after the European Central Bank cut its growth forecasts and unveiled a revamp of its bond-buying program. Europe is sliding, China is sliding, emerging markets that accounted for much of the global improvements in past years are sliding. Growth slowing - but here in the US most money managers, brokers working for firms, analysts and even the Fed and most economists still hold out that the decline in our stock market is going to be short-lived and the US economy is on a moderate growth path. For two years now almost every quarterly Fed forecasts have reduced the growth outlook. The US cannot grow much when the rest of world is sliding. Another factor - absolutely no inflation and regardless of central banks using the “transitory” to define lack of inflation. Once again define transitory more fully. No member of the Fed to my knowledge is willing to put a time frame to the word.

In summary, bonds stayed within a narrow range again today, and rates were essentially on par with Wednesday's. Looks like it will take either an unexpectedly strong/weak NFP report tomorrow, or more Fed guidance from their next statement to move rates up/down. There is certainly nothing wrong with current rates, and floating into NFP is inherently risky. Locking removes your risk, and I am recommending that for my clients within 30 days of closing. Whenever the next rate move hits, it may be both large and fast. The question is when that happens, and my crystal ball is broken today.