The official Employment Situation report was released this morning. After experiencing an extended period of tranquility, this event carried the potential to create volatility in consumer borrowing costs. Without further ado....
The Bureau of Labor Statistics have released the findings of the July Household Survey & the Non-Farm Payrolls Survey. Together these two surveys make up the Employment Situation Report, the most highly anticipated dataset available to the market. This release provides four headline measures on the health of the jobs sector.
- Nonfarm Payrolls: totals the number of jobs that were added to or cut from employer payrolls in the prior month. Consensus Forecast: -65,000 vs. -125,000 in June
- Unemployment Rate: the percentage of working-age, mentally able-Americans who are jobless. Consensus Forecast: 9.6% of the labor force vs. 9.5% last month
- Average Hourly Earnings: the average amount of earnings per hour of labor performed. Consensus Forecast: +0.1% vs. 0.0% last month.
- Average Work Week: average amount of hours worked by an employee per week. Consensus Forecast: 34.1 hours vs. 34.1 last month.
Here are the results:
- Nonfarm Payrolls: -131,000 in July. June was revised worse from -125,000 to a whopping -221,000! WORSE THAN EXPECTED
- Unemployment Rate: held steady at 9.5% BETTER THAN EXPECTED
- Average Hourly Earnings: +0.2% BETTER THAN EXPECTED
- Average Work Week: 34.2 BETTER THAN EXPECTED
Despite the better than expected Unemployment Rate and improved Wage metrics, the market focused on a larger than anticipated decline in Non-Fam Payrolls, the sizable revisions made to previous month's data, and disappointing jobs creation out of the Private Industry. HERE IS A FULL RECAP OF THE DATA
After the data was released stocks sold off and Treasuries benefited from another "flight to safety".
A flight to safety happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate money into risk-free U.S Treasury debt to provide a safe-haven AND an investment return. To remind readers, as benchmark Treasury yields fall, prices of mortgage-backed securities move higher, which allows lenders to offer lower mortgage rates. As Treasury yields rise, mortgage-backed security prices are led lower, which forces lenders to push mortgage rates higher.
This "flight to safety" led mortgage-backed security prices to new record highs! (AGAIN!. The question is: DID LENDERS IMPROVE MORTGAGE RATES?
Rate sheets are priced slightly better than they were yesterday, but the improvements were modest at most. The best 30 year fixed conventional mortgage rates remain in the 4.25% to 4.625% range for well qualified consumers. If you are looking for a 15 year term, you should expect a par rate in the 3.75% to 4.00% range. To be considered well qualified, you must have a FICO credit score of 740 or higher to secure the best rates without paying additional costs. The "best execution" 30-year fixed rate mortgage is still 4.375%.
Mortgage rates are unchanged on a week over week basis, 4.25% is still as good as it gets. Borrowers considering a refinance should submit a loan application as soon as possible so they are able to lock in their borrowing costs in the event mortgage rates do begin to rise from record lows.
The Best Lock/Float Advice MND Can Offer Consumers: READ MORE
The "best executed" lock/float strategy comes down to finding an originator who knows the loan market, studies underwriting guidelines, and just plain old gets the J.O.B done. You have to let the loan officer earn their commission. That's how you "ride the float boat" in this environment...make sure you have a damn good skipper. Plain and Simple.