Mortgage Market Update
This week brings us the release of only three monthly economic reports for the markets to digest. One of those is considered to be extremely influential on the financial and mortgage markets. We also have political and financial issues to watch in Washington D.C. as the debt ceiling problem doesn’t look to be any closer to a resolution. October 18th is the day that the federal government will run out of money if it cannot issue more debt to fund operations, which is quickly approaching.
The economic data starts tomorrow with the release of August's Factory Orders data at 10:00 AM ET. This Commerce Department report is similar to last Friday's Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 1.0% rise in new orders. A smaller increase would be good news for the bond market and mortgage rates while a larger rise would be bad news. Since a good portion of the data was already released last week, it is unlikely that this release will have an impact on mortgage pricing.
September's ADP Employment report is next, set for release before the markets open Wednesday. It has the potential to cause some movement in the markets if it shows much stronger or weaker numbers than forecasts. This report tracks changes in private-sector jobs, using ADP's payroll processing clients as a base. 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 accurate in predicting results of the monthly government report that follows a couple days later. Still, because we have seen reactions to the report, we should be watching it. Analysts are expecting it to show that 410,000 new payrolls were added. Good news for mortgage rates would be a noticeably smaller increase.
Friday has what is arguably the single most important economic report we get each month. That will be September's Employment report at 8:30 AM. It has many statistics and readings on the employment situation, but the most important are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for the unemployment rate to slip 0.1% to 5.1%, an increase in payrolls of approximately 450,000 and a 0.4% rise in average earnings. Weaker than expected readings should rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news.
Overall, Friday is the most important day of the week for rates. The calmest day may end up being Tuesday. However, we could see movement in rates multiple days as political, economic and financial news hits the wires.