Importance of the Employment Report on Mortgage Rates
We often stress the importance of the monthly “jobs report” in trying to forecast the direction of mortgage rates. The objective of this post is to provide an explanation of why this report is so important.
Let’s first have a look at what information can be found in the monthly “jobs report”. Here is a summary:
Employment Report
In the US, the employment report, also known as the labor report, is regarded as the most important among all economic indicators. The report provides the first comprehensive look at the economy, covering nine economic categories. Here are the three main components of the report:
1. Payroll Employment: Measures the change in number of workers in a given month and measures the number of jobs in more than 500 industries (ex-¬farming) in all states and 255 metropolitan areas. The employment estimates are based on a survey of larger businesses and counts the number of paid employees working part-time or full-time in the nation’s business and government establishments. This release is the most closely watched indicator because of its timeliness, accuracy and its comprehensiveness. It is important to compare this figure to a monthly moving average (6 or 9 months) to capture a true perspective of the trend in labor market strength. Equally important are the frequent revisions for the prior months, which are often significant. The bottom line for this measurement is that if the number of news jobs created or lost is better than what the market had expected mortgage rates typically rise and vice-versa.
2. Unemployment Rate: The percentage of the civilian labor force actively looking for employment but unable to find jobs. Although it is a highly proclaimed figure (due to simplicity of the number and its political implications), the unemployment rate gets relatively less importance in the markets because it is known to be a lagging indicator — it usually falls behind economic turns. The bottom line for this measurement is that if the unemployment rate is better than what the market had expected it can cause mortgage rates to rise and vice-versa.
3. Average Hourly Earnings Growth: The growth rate between one month’s average hourly rate and another’s sheds light on wage growth and, hence, assesses the potential of wage-push inflation. The year-on-year rate is also important in capturing the longer-term trend. The bottom line for this measurement is that if earnings growth is reported to be greater than what the market expected it can cause mortgage rates to move higher and vice-versa.
And why is it important?
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they’re getting paid and how many hours they are working. These numbers are the best way to gauge the current state and future direction of the economy. They also provide insight on wage trends and wage inflation. If wage inflation threatens, usually interest rates will rise, and bond and stock prices will fall. The Employment Report is scheduled for release at 8:30 (ET) on the first Friday of each month by the Bureau of Labor Statistics.
Posted: July 2nd, 2008 under Economics & Interest Rates.
Tags: Employment report, jobs report
Comments
Pingback from Mortgage Rate Update » Rate Update for August 1st, 2008
Time August 1, 2008 at 8:17 am
[...] The Labor Department released their much anticipated monthly jobs report this morning. Their report showed that the US economy lost 51,000 jobs in the month of July. This marks the seventh consecutive month of job losses. For the year, the US economy has now lost 463,000 jobs. (for a detailed summary as to how the jobs report impacts mortgage rates read this link). [...]
Pingback from My Mind on Mortgages » Rate update September 4, 2008
Time September 4, 2008 at 7:53 am
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Pingback from My Mind on Mortgages » Rate Update October 2, 2008
Time October 2, 2008 at 7:19 am
[...] addition the bailout traders will be focused on tomorrow’s jobs report. This is a monthly report issued by the Labor Department and can have a significant impact on mortgage rates. It is our opinion that tomorrow’s jobs report will show significant weakness in the labor [...]
Pingback from My Mind on Mortgages » Rate Update November 6, 2008
Time November 6, 2008 at 8:34 am
[...] due out tomorrow. For an explanation on why this report is so important for mortgage rates please read this link. For a summary on what our expectations are please watch today’s you tube [...]
Pingback from My Mind on Mortgages » Rate Update November 7, 2008
Time November 7, 2008 at 8:10 am
[...] As we discussed in yesterday’s rate update the big focus for the financial markets this morning is the monthly jobs report. [...]
Pingback from My Mind on Mortgages » Rate Update December 4, 2008
Time December 4, 2008 at 9:04 am
[...] All eyes are focused on tomorrow’s employment report. To understand the importance of this monthly report on mortgage rates we’d encourage you to review this link. [...]
Pingback from My Mind on Mortgages » Rate Update July 1, 2009
Time July 1, 2009 at 7:42 am
[...] from yesterday and are expected to remain here until tomorrow’s monthly jobs report. Click this link to learn why the jobs report is such an important economic report for mortgage [...]
Pingback from My Mind on Mortgages » Rate Update July 2, 2009
Time July 2, 2009 at 7:45 am
[...] Bad news for the economy is typically good news for mortgage rates and we’re seeing that this morning. For a more complete explanation on how the monthly jobs report impacts mortgage rates please refer to this link. [...]
Pingback from My Mind on Mortgages » Rate Update August 6, 2009
Time August 6, 2009 at 7:19 am
[...] the short-term, attention is focused on tomorrow’s jobs report (click this link to learn why the jobs report is an important factor for mortgage rates). Jobless claims numbers out [...]
Pingback from My Mind on Mortgages » Rate Update August 7, 2009
Time August 7, 2009 at 7:01 am
[...] third component of the jobs report that can impact mortgage rates is hourly earnings. The report showed that earnings were up 2.5% on a year-over-year basis which [...]
Pingback from My Mind on Mortgages » Rate Update September 3, 2009
Time September 3, 2009 at 6:29 am
[...] tomorrow brings the monthly employment report. Even if this report doesn’t beat analysts’ expectations, which would likely cause [...]
Pingback from My Mind on Mortgages » Rate Update December 2, 2009
Time December 2, 2009 at 7:26 am
[...] ahead Friday brings us the all-important jobs report (click this link to understand why this is such an important economic report for mortgage [...]
Pingback from My Mind on Mortgages » Rate Update December 3, 2009
Time December 3, 2009 at 7:32 am
[...] suggests that rates may continue to creep higher but tomorrow’s jobs report will be the catalyst after tomorrow. Analysts are expecting 125,000 jobs lost for November. [...]
Pingback from My Mind on Mortgages » Rate Update January 7, 2010
Time January 7, 2010 at 8:41 am
[...] brings the all-important jobs report (click here to understand why this report is so significant). Analysts are currently expecting job growth to [...]
Pingback from My Mind on Mortgages » Rate Update February 3, 2010
Time February 3, 2010 at 7:17 am
[...] January. Analysts are expecting a flat reading for Friday’s official jobs report. Click HERE to learn why jobs are important to mortgage [...]
Pingback from My Mind on Mortgages » Rate Update February 4, 2010
Time February 4, 2010 at 6:14 am
[...] frame. The catalyst for such a move could come tomorrow with the official jobs report (click HERE to understand why this report is [...]
Pingback from My Mind on Mortgages » Rate Update March 4, 2010
Time March 4, 2010 at 8:54 am
[...] released today missed expectations and therefore the markets continue to trade sideways ahead of tomorrow’s jobs report. The market is already expecting weak jobs numbers (70,000 in jobs losses and unemployment @ [...]
Pingback from My Mind on Mortgages » Rate Update March 5, 2010
Time March 5, 2010 at 8:24 am
[...] morning’s all important jobs report was better than expected (click HERE to learn why this report is so impactful). The markets were bracing for weak jobs numbers due to [...]
Pingback from My Mind on Mortgages » Rate Update March 31, 2010
Time March 31, 2010 at 8:05 am
[...] rates but the mortgage-backed bond (MBS) market is flat on the day. All eyes are focused on Friday’s jobs report. Given that the ADP report came in shy of expectations money managers are less likely to unload [...]
Pingback from My Mind on Mortgages » Rate Update April 1, 2010
Time April 1, 2010 at 8:08 am
[...] brings the all-important jobs report. The financial markets are closed tomorrow but based on recent trading it seems as though traders [...]
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Time April 2, 2010 at 8:09 am
[...] news for the economy is bad news for mortgage rates and that is holding true this [...]
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Time May 6, 2010 at 7:44 am
[...] be interesting to see how the markets react to tomorrow’s jobs report. Typically this report is the most important of all. However, attention remains focused on the European debt problems. Expectations are for [...]
Pingback from My Mind on Mortgages » Rate Update May 7, 2010
Time May 7, 2010 at 8:20 am
[...] are being credited to census hiring. This is much better than analysts had been expecting and ordinarily we’d see rates move higher on this [...]
Pingback from My Mind on Mortgages » Rate Update July 1, 2010
Time July 1, 2010 at 8:08 am
[...] the all-important jobs report. You can read about how this report tends to impact mortgage rates HERE. Last months report was much worse than expected and mortgage rates have decreased substantially [...]
Pingback from My Mind on Mortgages » Rate Update July 2, 2010
Time July 2, 2010 at 7:45 am
[...] a disappointing jobs report would mortgage rates move lower but as I mentioned in yesterday’s ‘rate update’ the market had already priced in a weak jobs [...]
Pingback from Mortgage Rate Update » Blog Archive » Rate Update for July 31, 2008
Time July 31, 2008 at 8:23 am
[...] Tomorrow brings the monthly jobs report. If you’re an avid reader of ‘rate update’ you know that over the years this report can have a substantial impact on the direction of mortgage rates over the next few weeks (to understand why read this link). [...]