August 1st, 2016
The ADP Employment report will be released before the markets open Wednesday, which has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. This report tracks changes in private-sector jobs in the company’s clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not very accurate in predicting results of the monthly government report that follows a couple days later. Still, because we sometimes see a noticeable reaction to the report, it is on this week’s calendar. Forecasts show an increase of 165,000 new payrolls. The lower the number, the better the news it is for mortgage rates.
June’s Factory Orders data is Thursday’s only relevant monthly data, coming at 10:00 AM ET. It helps us measure manufacturing sector strength by tracking orders for both durable and non-durable goods during the month of June. It is similar to last week’s Durable Goods Orders report that tracks orders for big-ticket items only. Since a significant portion of the data was released last week, this report likely will not have a big impact on the markets. Analysts are expecting to see a decline in new orders of approximately 1.9%. A bigger than expected decline would be considered good news for bonds and mortgage pricing, but it will take a large variance from forecasts for this report to heavily influence Thursday’s mortgage rates.
Friday brings us the almighty monthly Employment report at 8:30 AM ET. This report gives us the U.S. unemployment rate, number of jobs added or lost during the month and average hourly earnings for July. The best scenario for the bond market is rising unemployment, a sizable loss of jobs and little change in earnings. While some believe the preliminary reading to the GDP is the single most important report in general, it is posted quarterly rather than monthly like the Employment report. Friday’s report is expected to show that the unemployment rate inched lower last month 0.1% to 4.8% while approximately 165,000 jobs were added to the economy. Due to the importance of these readings, we will most likely see quite a bit of volatility in the markets and mortgage pricing Friday morning following their 8:30 AM ET posting, especially after the surprises of the past couple months in this data.
Overall, I am expecting Friday or Monday to be the most active days for mortgage rates. The middle days should be calmer and Thursday appears to be the best candidate for least active day. Besides the data we should also watch the major stock indexes for bond and mortgage rates direction. Sizable stock gains should pressure bonds and mortgage pricing. However, if stocks go into selling mode, conditions are right for bonds to benefit, driving mortgage rates lower. It would be wise to maintain contact with your mortgage professional this week if closing soon and still floating an interest rate.